Abhishek Kothari on Potential and Challenges of PoS-based Financing for Merchants
Over the past few years, the number of merchants using Point of Sale (PoS) systems has increased. The reasons are simple – it provides convenience to customers who prefer digital payments while at the same time enables business owners to increases sales. Now, the good news is that businesses can avail finance against transactions on their PoS terminals.
While PoS-based financing or Merchant Cash Advance is an emerging alternate credit alternative, its potential is huge. It allows the business owners to borrow money against sales registered through card swipes at PoS terminals. This means that if more transactions happen, more is the ability to borrow. It also reduces EMI burden on the merchants as they can opt for daily deduction from their swipes to pay the interest fee on credit.
Today, several fintech companies are leveraging their business experience, technology and data to combine lending with payments. They track every digital footprint such as merchant profile, transaction data and post-disbursement data on the swipe machine to make PoS-based financing as safe as possible. However, there are a few stumbling blocks that they need to overcome. For instance, there may be defaults if the merchants discontinue the use of machine or switch to a different PoS provider. If merchants are not technology savvy or have not adhered to KYC norms at the time of deployment of machines, these could pose concerns for lending companies for giving credit against PoS terminal sales.
While there are still gaps to be bridged in PoS-based financing, it is clear that it is poised for exponential growth.
To know further, read here about Abhishek Kothari’s insights on PoS-based financing as an alternate credit channel in India.