Collaboration Over Competition: A Top Lender’s Perspective

When a top industry lender first encountered our waterfall consumer finance model for point-of-sale (POS) loans, they were wary. Why invite competition into your deals? But this lender soon discovered that in a waterfall lending setup, competition can actually enable collaboration.

Joining a multi-lender POS platform didn’t mean giving up customers—it meant gaining access to previously unreachable ones while helping more consumers secure financing. It wasn’t a zero-sum game but a win-win.

The timing couldn’t be better. Point‑of‑sale financing is still the fastest‑growing slice of consumer credit, and the numbers are even bigger today than they were two years ago. New CFPB data released in January 2025 show that installment‑style loans such as BNPL already make up 17 % of the average American’s unsecured‑debt portfolio, and a striking 28 % for Gen Z borrowers. Usage keeps racing ahead: analysts estimate 86.5 million U.S. consumers used BNPL in 2024, and that figure will climb to 91.5 million in 2025.

A May 2025 national poll found 55 % of American adults have tried pay‑over‑time apps. Fintechs aren’t just nipping at banks’ heels—they’re siphoning cash: McKinsey’s latest update calculates that BNPL providers are now diverting $8 – $10 billion in annual revenue away from traditional lenders. Rather than be left out of the checkout flow, forward‑thinking lenders are leaning into waterfall consumer finance partnerships to stay competitive in 2025 and beyond.

The Silo Problem: Why Traditional Lending Holds Lenders Back

Despite POS lending’s rise, many lenders still operate in silos—independent setups with limited insight into competitors’ performance. This approach causes four major problems:

• Limited Market Visibility: Lenders only see their approvals and declines, with no sense of where they stand in the competitive landscape.
  
  
• No Real-Time Benchmarking: Performance insights come too late, often via lagging reports, by which time better offers have already won the borrower.
  
  
• High Decline Rates: Many lenders reject non-prime borrowers without an alternative path. Nearly 21% of applicants get declined or underfunded, and prime-focused lenders reject as much as 70% of applicants.
  
  
• Merchant Disappointment: Single-lender setups mean more abandoned carts and lost sales, damaging merchant confidence in the lender’s value.
  
  

Our partner lender had seen all these downsides firsthand. They knew there had to be a better model—and they found it.

What Is Waterfall Consumer Finance?

Waterfall consumer finance solves the silo problem. Instead of one lender determining a customer’s fate, the application moves through a sequence of lenders until approval is found. All lenders compete for the loan of the consumer head-to-head. This creates a transparent and competitive ecosystem where lenders bid to win business, consumers are more likely to be approved, and merchants increase their conversion rates.

Core Benefits of the Waterfall Lending Model

• Higher Approval Rates: More lenders mean more chances to say “yes.” Prime, near-prime, and subprime lenders each play a role, increasing overall approval rates and salvaging otherwise lost sales.
  
  
• Market-Driven Offers: Because lenders know they’re competing, they put forward better offers. This benefits customers and encourages lenders to focus on their core strengths.
  
  
• Real-Time Performance Data: Lenders gain actionable insights—how often they win or lose deals, how their rates compare, and how changing market conditions affect performance. Transparency drives improvement.
  
  
• Better Consumer and Merchant Outcomes: Consumers get more approvals and often multiple offers. Merchants enjoy higher sales and happier customers. Surveys show that 75% of consumers prefer merchants offering instant financing, and 39% say they’d spend more when flexible options are available.
  ‍

‍

Why This Leading Lender Chose the Waterfall Model

Market Visibility Like Never Before

The lender gained live insight into how they performed against peers. They could see which applications they lost—and why—giving them a clearer market view than ever before.

Offer Optimization in Real Time

Using data, the lender began tweaking credit criteria, adjusting rates, and offering special promotions to see what worked. For the first time, they could A/B test strategies and quickly iterate.

‍

Elevated Experience for Merchants and Customers

The lender’s merchant partners saw improved approval rates, more satisfied customers, and higher conversion. That goodwill boosted the lender’s brand and deepened merchant relationships.

The results spoke for themselves. This lender didn’t just preserve their business—they grew it, reaching new customer segments they’d never accessed before.

Why More Lenders Are Getting Onboard

The POS financing market is evolving fast, and waterfall platforms are where the action is. Here’s why lenders can’t afford to stay out of it:

• Access to Deal Flow: If you’re not on a waterfall platform, you’re not being seen when consumers are applying. Traditional lenders risk missing out as fintechs dominate this space.
  
  
• Merchant Preference for Multi-Lender Models: Merchants increasingly expect flexible, high-approval financing. Single-lender models are being replaced by platforms that deliver comprehensive solutions.
  
  
• Customer Growth and Strategic Insights: Waterfall platforms are a customer acquisition engine, and a rich source of market data. Lenders learn faster and can innovate more effectively.
  
  
• Future-Proofing: The trend toward bank–fintech collaboration is accelerating. Waterfall lending supports inclusive, responsible lending—key values for consumers and regulators alike.
  
  

Don’t Miss the Waterfall Opportunity

The story of our leading lender illustrates a profound mindset shift: competing lenders can thrive together in a waterfall model. This collaborative environment boosts approvals, empowers data-driven decisions, and deepens relationships with both merchants and consumers.

If you're a lender still operating in isolation, now is the time to reconsider. Multi-lender POS financing isn’t a niche solution—it’s becoming the industry standard.

FinMkt’s waterfall platform makes it easy to take that first step. With a single integration, lenders gain access to a robust ecosystem of merchants, real-time analytics, and opportunities to reach more customers—all while staying in control of their credit strategy.

Ready to see what waterfall lending can do for your business? Join the movement with FinMkt, grow your reach, and deliver smarter, faster financing that benefits everyone.

Sources:

McKinsey | Fast Company | Pymnts | Total Retail | Capital One Shopping | The Week | Latinia