Dive Brief:
- Ally Financial is partnering with Mastercard’s Vyze to enter the retail point-of-sale lending space, the bank announced Tuesday in a press release.
- Ally will offer installment loans on retail purchases between $500 and $40,000 with interest rates ranging from 9.99% to 26.99%. Monthly fixed-rate installment loans will range from six to 60 months, the company said.
- Ally abandoned its credit card model last year to expand into point-of-sale lending when it bought Health Credit Services, a company that offered unsecured loans to finance medical procedures. The bank rebranded that partnership as Ally Lending.
Dive Insight:
Upon acquiring Health Credit Services, Ally CEO Jeffrey Brown said he wanted to apply that business's point-of-sale lending capabilities to other retail sectors. CFO Jennifer LaClair expressed the company's excitement last year at entering the point-of-sale space, citing an 18% to 20% annual growth rate. Outstanding balances on unsecured personal loans have jumped nearly 60% over the past four years to $138 billion, credit bureau TransUnion reported.
Ally, like Vyze, is banking that younger consumers, who may find credit cards hard to get or unpredictable, will favor point-of-sale lending's fixed monthly installments. Nearly three-quarters of retail customers surveyed by Business Insider last year said installments helped with budgeting. Further, 70% said installments eased the stress of making a large purchase. The company is banking, too, that the model results in increased sales for merchants.
"Mastercard's deep experience in global payment and technology positions Vyze as a leader in the point-of-sale lending market," Hans Zandhuis, head of Ally Lending, said in Tuesday's release. "Together, our partnership gives merchants, who want to offer consumers trusted and stable installment loan options, a powerful, digital option."
