It may surprise you that 62% of Americans have less than $1,000 in their savings account. Yet, about 98% own some sort of cell phone and 68% own a smartphone.
Sure, there’s bound to be some overlap but the numbers strongly suggest that most smartphone users simply can’t afford to pay for their devices upfront in full.
How do they do it? Financing.
For years, 3rd parties selling used and refurbished devices have suffered sales conversions without the ability to offer cell phone financing to their customers.
Luckily, some options are starting to surface that give non post-paid phone vendors a greater inventive to stock and offer higher end smartphones and tablets to their clients.
We’ll go over some financing statistics, how financing can help improve your sales and review a few financing programs that might fit your needs.
Financing Statistics
Users who can afford to pay out of pocket for their phone have rarely ever done so. The big US wireless carriers marketing strategy educated buyers on the high MSRP in order to convince subscribers that signing a 2 year contract to subsidize the cost of the phone was in their best interest.
Now-a-days, they’ve shifted from the 2 year contract to no contract and financing the phone. Instead of paying $200 upfront for a new iPhone or Samsung Galaxy, subscribers are charged the non-subsidized price of $650 with the option to make monthly installment payments. The carrier makes up for the difference with lower priced service plan.
At the end of the day though, the subscriber is still tied to the carrier via the phone despite not having a contract. Just another savvy marketing technique that’s paid off for the big boys.
US Is Not The Norm
The US has the most “contracts” associated with their smartphones in a 2012 study by GRS. It’s a bit outdated and likely to be a few ticks lower in 2016 due to the explosion of prepaid over the last 4 years.
Alternative financing and credit options outside the traditional banking system has been gaining popularity with other tech startups such as Adro, that offers international students access to US banking services when they first arrive.
Carriers Shift to Installment & No Contracts
Verizon and AT&T saw a 5% and 19% shift to installment plans in 1 quarter. The trend hasn’t slowed down since.
Growth of Pre Paid
Prepaid has grown for 5 straight quarters into 2016 from within the carriers own prepaid plans and their MVNO operators (Simple Mobile, Page Plus, Red Pocket etc).
What does it all mean?
In the past, for example a 3rd party might be selling an older flagship for $250. Compared to the current new MSRP of $489, it’s really quite a deal!
However, consumers thought process told them they could get the latest model for just $200 if they sign a 2 year contract. Now that $249 phone doesn’t seem like a deal after all.
Today, consumers are losing this mindset and will be more aware of the total amount they spend on both the phone and service plan thanks to the marketing efforts of the big carriers.
No contracts and financing a device are becoming the norm. Prepaid is still rapidly growing.
Obtaining service and/or devices outside of an official carrier store won’t carry the negative image it’s had in the past.
What’s missing? Financing programs for 3rd parties.
Even with the shift, US consumer habits (outside of telecom) have always preferred financing over paying upfront in cash.
3rd Party Financing Options
Many entrepreneurs have recognized the need for consumer financing options outside of official channels and now allow small mom & pop shops to extend credit to their customers. Modern technology helps make this possible and help merchants sell more products and even make extra commissions when they convert a customer.
PayJoy
Their motto is “Smartphone-enabled financing”.
- Customers register for PayJoy at a local merchant with their Facebook account, phone number, and government issued I.D.
- Customers choose a smartphone, make a reasonable deposit, and choose the 3, 6, 9, or 12 month payment plan that works for them.
- Merchants install the PayJoy software on the new phone. Once the purchase is paid in full, the phone is fully unlocked!
The app is a pretty neat concept. Sort of like iCloud locked for theft but used to lock a device if the customer fails to make payments.
Back by some pretty good private equity and technical innovators.
SyncUp Solutions
Targets retail wireless stores who sell smartphone devices with no credit check.
Requirements:
- A Bank account in good standing
- A job
- Make at least $1000 per month
- Deposit at least $500 per month
- Once Approved you get funded direct deposit within 2 days
Customers can get financing for smartphones, tablets, accessories and any tangible item in a merchants store.
https://www.youtube.com/watch?v=4Br4ukBLM4o
Snap Finance
Not specifically tailored for the wireless and can be used for any items including cell phone repairs.
- No credit check
- Easy online application
- Up TO $3000
- Money can be used at any other Snap Merchant
Conclusion
Opportunities to sell higher end devices is on the rise and providing financing options will be the best way to profit.
Options are fairly thin with financing programs tailored towards wireless retail but more are sure to pop-up in the future.
If you use or know of any other financing programs, feel free to post them in the comments and we’ll take a look and be happy to include them on this list.
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I am totally agreed with you that most of people buy cell-phones instead of saving and they also should utilize there phone by repairing and there’re lots of online mobile phone repairing companies without any complains and they’re trust-worthy .