FEATURE: RETAIL FINANCE
BUILD NOW PAY LATER T
Tom Curtis, Account Director, at retail finance platform Divido, describes how DIY and home improvement merchants can help customers upgrade their homes with responsible lending
he cost-of-living crisis continues to deepen around the world, putting more pressure on all merchants than
ever before to assess how they can maintain cashflow when consumers are watching their spending more closely. One way they are doing this is by offering checkout finance solutions. However, recent criticisms of one form of checkout finance - Buy Now Pay Later (BNPL) – has made some merchants nervous about the morality of getting consumers to spend more than they can afford. However, new innovations and increased regulation coming into force is quelling some of these issues. So, is now the time to invest in a checkout finance solution? Amid the frenzied media debate, it’s easy to see why many commentators have raised questions about the long-term viability of retail finance. But few have actually asked whether checkout finance might represent a force for good over the coming months. Consider this: a recent survey by Which? found one third of British households couldn’t afford to replace their boiler if it broke down. And yet, over the course of this winter, 1–3% of households will need to do just that. Equally, more than a quarter of homeowners in the UK have put the brakes on making their homes more energy efficient due to cost-of- living pressures. First, this means many may have to live in cold, damp homes or pay a hefty price to put the heating on. Second, this is making further costs pile up; the average household could save £500 a year on bills with good insulation and heat pumps.
It is a vicious cycle of not being able to invest in upgrades that will – ultimately – save money in the long run. I firmly believe that retail finance can help to break this cycle though and encourage solid financial behaviour in the face of a looming recession. Not only could it allow customers to uphold their standards of living should something go wrong, but can also help DIY and home improvement businesses to maintain a sustainable profit line.
14 DIY WEEK MAY 2023
Tom Curtis, Account Director, at retail finance platform Divido
The benefits of retail finance for merchants Simply, retail finance is essential for merchants who want to remain competitive. Half of Gen Z and 54% of millennials reportedly use BNPL products, and many more consumers actively seek out BNPL and other retail finance options at a merchant’s checkout. Those who don’t see finance options at the checkout may be tempted to shop elsewhere. Doing so can increase access to new customers, many of whom will offer high loyalty as a result of a positive purchase experience. Taking the experience to the next level, many checkout finance options can actually offer a more responsible way for people to pay for large ticket items. For example, many lenders now offer interest-free payments over years, rather than traditional pay in three BNPL options. Customers can also put down a larger initial deposit leading to smaller repayments, increasing their control over their finances and make it easier for them to manage payments. This can offer huge benefits
to customers. A customer who urgently needs a new boiler won’t need to save for several months to afford their purchase. Better still, the customer may then add more items to their basket, increasing the average order value. What started out as a boiler purchase could lead to the customer adding new tools, sealants, an extended warranty and other items. Ultimately, with retail finance, consumers have increased flexibility when it comes to managing their finances.
Lending for good
Above all, the cost-of-living crisis is an opportunity for the DIY and home improvements industry to support customers through the economic squeeze. Retailers and lenders should not shy away from providing finance amid economic difficulties, so long as they have done their due diligence to ensure the customer can be expected to manage their repayments. The first approach to response lending should be only offering checkout finance in support of higher-cost items, not everyday essentials. Expenses like food, fuel and energy come around too frequently in one’s budget for credit to be a healthy option. From a merchant’s perspective, making a profit on the back of consumers’ short-term financial pressure
is
neither an ethical nor sustainable business model. Secondly, merchants should position checkout finance as an affordable alternative to traditional credit. Whereas credit cards penalise the consumer, in a sense, by charging interest at an average rate of 14.6% APR, checkout finance imposes no fees except in cases where the loan moves from being short-term to long-term, or where repayments are missed. Merchants have a duty to ensure that any benefits are communicated to the customer in order to help them make an informed decision. Checkout finance can empower consumers to make essential large-ticket purchases at a time when their budgets are growing tighter. By putting the customer at the heart of decision making, partnering with the right provider, and training teams in the ethics of checkout finance, DIY retailers can gain a competitive edge amid a challenging period.
Checkout finance for moments that matter
Divido connects merchants, lenders and payment partners at points of sale across Europe. Easily offer retail finance in all your markets with one integration, or white label our tech stack to launch your own services. Visit
www.divido.com to find out more.
www.diyweek.net
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40
