Is it better to finance a smartphone purchase or pay upfront? Well, it depends. Upfront purchases help consumers avoid debt, but they may tie up all the money at once. A compromise may start to take effect. Working out the must-have features one needs and removing all the nice-to-have ones become key in making the final purchase decision. Smartphones are a necessity for many people, and smartphone financing makes room to make mobile handsets affordable.
Smartphone financing is available through financing companies, telecom operators, and manufacturers. Today, financing schemes are in greater demand as customers witness the rising average smartphone price each year. As financing schemes prove popular to boost handset sales and monetize associated services, misuse has surged.
Device Financing Risk Management (DFRM) offers smartphone financing providers to manage misuse and other associated risks.
Misuse of Financing Schemes
Aggregators have found a way to misuse schemes. They enlist customers, especially those who remain unaffected by a bad credit score, to buy smartphones in monthly payments. Aggregators flip these devices bought on financing for cash in the market, leading to gray market sales and financial losses.
Many customers pay back in monthly payments, but some also default. Poor cash flow due to default on payments or late payments puts pressure on businesses. They have to spend time chasing debtors or employing debt collection services to receive customer payments. The added cost of payment collection adds unnecessary pressure on margins.
Smartphone sales over monthly payments have also unfolded opportunities for fraudsters to obtain expensive mobile handsets from telecom operators at zero cost with no intention of paying. Fraudsters use various tools and techniques to get genuine customer details where the information is used to buy handsets without the customer’s knowledge.
For telecom carriers, ensuring their SIM card is used in a financed smartphone during the payment term is crucial for revenue assurance. Remarkably, a considerable number of customers use alternative SIM cards on financed devices, putting pressure on margins.
Protect Smartphone Financing with Device Financing Risk Management Platforms
Device Financing Risk Management (DFRM) platforms shield telecom carriers, financing companies, and other smartphone financing providers from the risk of misuse.
Additionally, DFRM platforms offer integration with credit bureaus, identity verification technologies, payment gateways, payment processing, data analytics, and other tools companies use to manage the smartphone financing process.
Given the surging demand for smartphone financing, it is easy for customers to switch schemes and leave outstanding debt behind. When this happens, many companies will write off balances and are stuck with a large inventory of pre-owned smartphones. DFRM provides an opportunity to make smartphone financing beneficial without taking undue risks.