BCBG Max Azria Group LLC is offering its online holiday shoppers a new way to pay: Monthly installments paid through a virtual credit card, says the retailer.
The feature went live on BCBG.com on Nov. 18, and on BCBGeneration.com on Dec. 4, and while Magallon would not disclose numbers, she says the retailer is pleased with results so far.
“It was a no-brainer because it was painless to implement the virtual card, and the card offers a solution to a millennial who is more likely to purchase a BCBG dress and who may not have the discretionary funds to pay for it all at once,” says Michelle Magallon, senior vice president of global e-commerce and omnichannel at the women’s fashion brand, No. 424 in the Internet Retailer 2015 Top 1000 Guide.
Magallon says the payment option fills a void for customers 28-34 years old who don’t want credit or have no credit history. Top500Guide.com data shows that 23% of BCBG’s customers are ages 25-34, its largest segment, and 17% are under 24. The retailer’s target market is young professional women, primarily ages 18 to 35, who are interested in the fine fashions, according to a BCBG blog post.
The access the financing, a customer clicks on a promotion—BCBG is generating the promotions through its content management system via emails, category pages, its home page and landing page—and goes off of the BCBG website and onto alternative financing service Affirm’s website. The customer then fills out an online application for credit, receives a code on her smartphone to verify her identify, and uses the one-time code to check out after finishing her shopping at BCBG.com. The shopper copies and pastes the code into the credit card processing form at BCBG.com.
Most customers provide such facts as name, birth date, mobile phone number and last four digits of Social Security number. Using these details, Affirm accesses and evaluates thousands of pieces of data about applicants outside of traditional FICO scores to determine ability to repay. An approval decision is rendered in seconds. Once approved, Affirm settles directly with the merchants within one to three business days, taking on all the repayment and fraud risk. Affirm charges an online retailer the same rate, 2-3%, as typical credit card processing fees, the company says.
Magallon says she learned that micro finance is attractive to young consumers after her experience working as chief marketing officer for digital commerce for Aeropost Inc., a mail and package forwarding business based in Costa Rica, and launching yuujuu.com, a marketplace for U.S. products for Latin American consumers.
“Latin America is all about microfinance; you can pay in up to 12 installment payments at Burger King for a hamburger,” she says. “It was like, ‘Let’s just put it out there.’ And our customers immediately started responding to it.”
Magallon declined to provide terms of the deal with Affirm, but said, “We are all trying to drive massive (sales) numbers for Q4.”
Brad Selby, vice president of merchant services for Affirm, says a customer select terms of payment and sees exactly how much the transaction will cost, including interest charges. Interest rates vary from an annual percentage rate of 10-30%, he says. On the purchase of a $400 cocktail dress at 10% APR when paid in 12 monthly payments using Affirm, the simple interest rate is 5.48%. That comes out to $22 in interest over the life of the loan, BCBG and Affirm say. The same purchase at 30% APR and paid in three monthly payments using Affirm, results in a simple interest rate of 4.96%, making the total interest charged $20, the companies say.
Affirm, launched by PayPal co-founder Max Levchin in 2012, targets consumers ages 18-34, as well as to students, debit card-only users, new U.S. citizens and people who don’t trust or use credit cards. The company’s Buy With Affirm program for merchants launched in June 2014. Affirm started testing its program with Shopify in October.
Favorite