Comparing the top Point-Of-Sale Finance Providers

Matt Soczywko

For all types of merchants, offering financing options can drastically increase consumers’ willingness to buy goods and services.

According to findings gleaned from the inaugural Citizens Point of Sale Survey conducted in the US, 76% of customers were more likely to make a purchase when a financing option—such as an instalment-based payment plan—was made available.

The survey also found that:

  • 62% of customers prefer fixed monthly plans with clear payment terms
  • Less than half (43%) of respondents would use alternatives like credit card financing for big ticket purchases

In the UK, Duologi found that 78% of consumers would be happy to purchase something by point of sale, or PoS, finance — and those implementing the solution could expect sales uplifts in the region of 30% as an immediate impact. Additionally, 43% of consumers admitted that they spent more when convenient financing was available.

Clearly, as far as consumers are concerned, whether UK-based or Stateside, offering a financing option can make an enormous difference in encouraging them to make purchases. However many merchants still mistakenly think that consumer financing options are only available to those selling ‘big ticket’ purchases, or in bricks and mortar outlets.

In the UK, Duologi found that 78% of consumers would be happy to purchase something by point of sale finance

Thankfully, that is no longer the case — and there is a vibrant pool of consumer finance providers that are suitable for e-commerce or low-ticket providers. Some, like Klarna, even operate their own payment gateways making them full-fledged payment processing solutions. The provider landscape is a varied one and includes institutions such as banks, dedicated credit providers, and even specialists in retail PoS financing.

We’ve listed them here accordingly, based on the best options currently available to the UK market.

Bank PoS Finance Providers

Klarna

Instalment payments are interest-free for consumers and Klarna assumes full fraud and credit risk for sellers.

Sweden-based Klarna—full name Klarna Bank AB—offers a variety of financing solutions for merchants including instalments, pay in 30 days, as well as longer term financing solutions which allow merchants to offer credit of between six and 36 months to customers.

Instalment payments are interest-free for consumers and Klarna assumes full fraud and credit risk for sellers.

Klarna costs up to 5.40% depending on merchants’ annual sales volume plus a fixed fee of £0.20 per transaction.

Klarna Checkout, the front-end for offering consumers financing options, integrates with all major e-commerce platforms including Shopify, WooCommerce, and Magento.

Learn more about Klarna POS financing for UK-based merchants.

Shawbrook, Ikano.co.uk, V12 Retail Finance

There are other providers who are also fully-fledged banks offering PoS retail financing to UK-based merchants.

These providers include:

  • Shawbrook Bank: Shawbrook offers interest-free and interest-bearing agreements through its PoS finance offering. APRs on point of sale financing solutions range from 0% to 19.9%.
  • Ikano Bank also offers PoS loans. Merchants can offer customers interest free credit (IFC), deferred payment solutions, and interest baring loans. The bank has working relationships with Ikea, Zanussi, and other major retailers in the white good and furniture space.

Recommended for: Merchants that want to work with PoS financing providers with flexible payment solutions and (sometimes) integrated payments processing functionalities.

White-Label PoS Finance Providers

Other merchants have focused on providing PoS financing B2B. Divido, for instance, provides an off-the-shelf point of sale solution for businesses — and the implementation model is the same as its overall financing system, which is based on a white-label origination model.

The B2B PoS financing platform allows business buyers to apply for up to £150,000 in credit up front.

The company says that business buyers are often interested in using the tool for cash flow purposes. This is particularly true for smaller businesses that are making big ticket company purchases.

Recommended for: B2B sellers, particularly those selling into the SMB space. And businesses that want to offer a white-label credit offering.

Established larger non-bank lenders

For those merchants that feel the need or would prefer to partner with a larger, more established financial provider for offering their consumers POS financing, organisations such as Hitachi Capital are a good fit.

Hitachi provides finance solutions to more than 4,000 retailers across the UK.

Hitachi’s offerings include:

  • CreditMaster2: which will process customers’ finance applications in under three minutes. The system also uses e-signature capture to cut down on paperwork.
  • PaybyFinance: which supports financing for online transactions. It includes a plug-and-play integration with most website technologies and the application process can be completed in seconds.

Recommended for: These institutions are also good choices for merchants that need additional hand-holding during the on-boarding and setup processes. They are also relevant for businesses that (probably correctly) believe that offering finance through a major institution or recognised name will instil extra confidence in their customers and improve conversion, a bit like how giving the option to pay via PayPal is still shown to reduce cart abandonment.

Smaller PoS Finance Specialists

Some providers, such as Omni Capital Retail Finance, actually specialise in providing this form of financing. A member of the Finance and Leasing Association—the UK’s leading trade association for consumer credit providers—Omni Capital offers a cloud-based platform which integrates with merchants’ websites, with the promise of a decision within ten seconds.

Omni Capital also offers daily retailer settlement to help merchants optimise cash flow and utilises CreditSentry to detect and prevent fraudulent transactions.

Recommended for: Merchants that have the know-how to develop their own integrations, and want the flexibility that comes from partnering with specialist providers that have deep experience in the retail PoS space. This can translate to more expert support.

A Panoply of Options

A vibrant ecosystem of providers has emerged and is evolving in the retail PoS space. For merchants, although offering financing solutions results in a slight erosion of margins, that dent has been shown to be more than offset by the increase in sales which studies have demonstrated.

For many items, the option of PoS finance as an experience that buyers have already been clamouring for. Answering that demand should result in increased sales.

This is an introduction to the options available, and merchants should do their own detailed due-diligence when deciding on a partner. As a kick-off, merchants should consider the following when assessing a prospective point of sale financing partner:

  • What financing options are available?
  • Which e-commerce platforms does the application process integrate with, i.e. is it plug-and-play with the merchant's existing UX?
  • Is the implementation fully white-label or is the lender’s identity revealed?
  • What is the potential APR?

Those seeking the widest selection of options might be best partnering with the bank Klarna, who are fast becoming the market leader, while others who need a solution that allows them to sell B2B, might opt for a provider such as Divido (which has tailored a solution for precisely this use case).

There are abundant options in the market and now is a great time for merchants to realise the business benefits from rolling out convenient retail credit solutions for consumers.

Matt Soczywko is Head of Marketing at Elsewhen. He’s worked as a marketer both freelance and in-house at startups and studios in his native city London for almost 10 years, working across brand, content, performance, copywriting and video.

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