Point of sale finance is helping shoppers from across the UK regardless of income. According to data from Close Brothers Retail Finance, Londoners spend more on average on point of sale finance than any other region, spending a total of £1,001 a month. Similarly, the highest proportion of transactions (15% of the UK total) are made by people in the South East. Despite Londoners and those in the South East having the highest and second highest levels of disposable household income in the UK, they are still opting for point of sale finance over other options.
The middle-class are also benefitting from finance options as one in three, those in the ABC1 category, have said they could not pay an unexpected bill of £500 without resorting to borrowing.
It’s clear that many retailers aren’t benefiting from offering point of sales finance, especially when their customers want a variety of ways to pay. According to a survey from Close Brothers Retail Finance of 500 retailers across the UK, 63 per cent of SME retailers think there are no benefits to finance, and only 5 per cent offer it, not understanding how much customers value the option. In fact, over half of customers who buy using retail finance would have bought elsewhere if it had not been available, and almost 3 in 5 (59%) stated that they only bought because retail finance was available. Retailers have also reported up to a 30 per cent increase in sales when offering finance as an option at checkout.
Consumers spend on average over £100 more a month when products are interest free. One in seven retailers (13%) said that it creates a demand for more expensive goods and one in six (17%) said that it benefited the customer by giving them more payment options.
Around one in five retailers think customers wouldn’t want to take on debt from retail finance, but the reality is that shoppers have adopted a ‘pay as you use’ attitude and are comfortable with paying for things over time. There were 242 million purchases made on credit cards worth £13.2 billion in November 2015, a year on year increase of 14 per cent, with 58 per cent of purchases incurring interest charges. The benefit of point of sale finance is that it offers the customer a fixed price over a fixed term, allowing people to plan their finances over a set period of time as debt doesn’t continue to rollover.
Alex Marsh, Managing Director Close Brothers Retail Finance said, “there are many myths that exist about point of sale finance – that it is just used by low income households or that people are reluctant to use it compared to other forms of finance such as credit cards. These are simply not true. Our research shows that it is shoppers in high income areas of the UK who are most likely to use this type of finance. Many of these purchases are on 0% interest monthly payments, and it appears many consumers are interested in using point of sale finance as a financial planning tool to spread the cost in a structured and easy to manage way.”
