Making sense of your retail credit options

Offering consumers responsible access to compelling credit offers is now a vital part of a successful checkout experience.

The consumer credit landscape is evolving at a rapid pace. Technology has reduced barriers to entry, allowing a swathe of new credit providers to enter the market. At the same time, a generation of consumers has emerged who expect flexible payment options.

For retailers, this evolution is a huge opportunity to harness credit capability to increase basket size, build customer loyalty and generate return engagement.

Finding the right solution for your business can be a challenge. But there is a way through.

Options

In this context, it is useful to define two key types of retail consumer credit – Point of Sale credit (POS) and Buy Now Pay Later (BNPL).

POS credit has existed for decades and by offering longer-term repayment periods of 12-36 months in fixed instalments, it has traditionally been used for larger-ticket items. White goods and furniture are typical examples of products most suitable for POS credit, but the method is appropriate for the majority of larger purchases. To ensure the higher amounts are responsibly lent, it normally involves a more extensive sign-up process including formal credit and affordability checks.

BNPL is popular amongst younger customers, typical values are low and repayment is over a shorter term. There are generally fewer checks, making sign-up quicker and easier. Offers such as paying nothing for 30 days, or regular payments over 3 weeks to 3 months are typical examples of the model. BNPL tends to be a more attractive option for smaller-ticket items. The fashion sector has been a leading market for BNPL, but its potential extends across a range of products.

For most retailers who offer mid-range transaction values, the choice between the two options may not be as clear. Customers shopping within this range may not want short repayment terms of just a few weeks, but equally are put off by instalment plans that last a year or more.

NewDay’s digital credit account Newpay addresses this challenge by providing borrowing options across a range of transaction values. Newpay is a single credit account accessible via a network of different retailers. It delivers a simpler experience at checkout and offers consumers the flexibility to choose their own repayment period and set instalments to suit their circumstances. A Newpay customer only has to apply once, can make repeat purchases and manage multiple plans with a single monthly repayment.

Benefits

Providing responsible credit options brings enormous benefits to retailers – it builds customer loyalty by offering them choice and flexibility in how they spend and engage with your brand. It is an essential feature of a successful retail experience.

Changing technology and consumer expectations are blurring the lines between different forms of credit and increasingly retailers need a way to combine the best features of both POS credit and BNPL. They need credit products that offer convenience, flexibility and simplicity, but are underpinned by a focus on responsible lending.

As the retail environment continues to evolve, consumers are looking for access to a range of payment and credit options. As the credit landscape continues to evolve, brands who offer the right mix of responsible options have the opportunity to drive deeper relationships and repeat engagement.

Dominic Hanson, Head of Business Development, NewDay