The standard arguments in favour of Point of Sale (POS) retail finance are familiar: Higher sales and bigger purchases. New research suggests, however, that retailers may not be quite as sold on the concept as many assume.
Zero per cent solutions come at a cost for retailers, while for some retailers POS finance can itself be a source of profits. Either way, POS has become a mainstay of retail sectors including jewellery, furniture and electrical goods.
In difficult times, POS finance seems more relevant than ever, offering very straightforward ways of paying overtime, generally without setting up longer-term revolving credit lines.
The sixth annual edition of Apex Insight’s annual Retail Point of Sale market insight report suggests that even before the Covd-19 crisis, many retailers were rethinking their use of POS finance.
Apex tracked the use of POS options by 50 top retail groups since 2018. During this period, only 11 out of the 48 surviving retailers have kept their POS finance arrangements entirely unchanged.
28 of the 48 firms changed the terms offered. The majority of these firms either removed or restricted their interest-free options, suggesting retailers are seeking to better target subsidies to customers most likely to buy more than they would otherwise have done.
19 of the firms appeared to switch providers during the period (based on changes to disclosures on their websites) demonstrating the strong competition in this part of the consumer credit market, with over 30 active firms including established players such as Hitachi, Barclays Partner and BNP Paribas together with new entrants including several fintech providers.
In summary, the research suggests that retailers have been reviewing the costs of offering subsidised retail point of sale finance. Post crisis, perhaps we will see more retailers gradually edging away from relatively costly interest-free credit solutions towards charged-for, but still good value, alternatives.