How much does it cost to offer retail finance?

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If your business is yet to offer retail finance options at checkout, you’re missing a huge trick – regardless of your sector. 


Most of us expect to find ways to spread the cost of an order as a payment option. And if we don’t, we’ll just keep browsing until we find a competitor who offers what we need. 


There’s a lot of content out there already about the benefits of offering retail finance, how to get started and tips for keeping track of your progress. And there’s also information around the potential negatives of adding finance to your checkout. Buy Now Pay Later, for example, has taken a bit of a bashing in recent years due to opaque additional fee policies and high levels of customer debt.  


Thankfully, the UK government has regulation for the short-term finance sector on its radar, and we should see changes soon. But a lot of retail finance doesn’t fall under the ‘Buy Now Pay Later’ umbrella. Any lending that extends more than 12 months, for example, has to be regulated by the Financial Conduct Authority (FCA). And some finance solutions, like DivideBuy, adhere to FCA guidance regardless of the term length – so you’ve got plenty of safe options.  


But you didn’t come here to read about the pros and cons of offering retail finance. You wanted to know about associated costs for you, the retailer, when adding finance to your eCommerce or instore checkout. So let’s talk numbers. 


How much does it cost to offer finance to customers? 


The answer this depends on several factors, including:


– How much revenue you’re turning over  


– Your average order value 


– Whether you want to offer interest free credit, interest bearing credit or both 


– Your sector and any associated risks for the finance provider 


What costs do I need consider when offering retail finance?


Here are some fees and charges which you should keep in mind when exploring the idea of adding retail finance options to your payment options. 


1. Interest Charges 


If you want to offer interest free finance (always a popular choice for most customers) you’ll likely need to absorb the interest charges on your customer’s behalf and pay these to the finance provider. 


2. Commercial rates 


This is the percentage of each credit sale that you’ll pay your finance provider. While it’s important to find a reasonable rate offer, remember that the big number you want to focus on is conversions. If the finance provider has a proven record of turning browsers into buyers, you’ll get your money’s worth.  


3. Service fees 


There’s a lot of admin involved in processing retail finance payments. Your finance provider might charge you service fees for setting up your solution and keeping it running.  Be sure to ask about the various options available. 


4. Technology and infrastructure 


Getting your solution live involves an onboarding and integration process which can go smoothly – but can also be very time-consuming and costly. Ideally, you’ll work with a provider who can handle the whole process on your behalf, end to end, and get your credit sales going ASAP.  


5. Compliance and regulatory costs 


If you’re a UK merchant and you want to offer regulated finance products (interest free/interest bearing finance spread across longer than 12 months), you need to be FCA-licensed. You can either apply directly or become an Appointed Representative via a Principal. Find out how here.  


6. Marketing and promotion 


You’ll want to advertise your retail finance offering as loudly as you can. Consider what you’ll need to invest in marketing and promotional activities to make sure customers know about their options. DivideBuy helps merchants lower marketing costs by 30%+.  


7. Training and education 


If your team members are going to be promoting retail finance to customers, you’ll want to provide training on how they can do this compliantly and effectively. At DivideBuy, we offer this training to merchants offering finance to make sure everyone is on the same page. 


8. Customer service 


Providing customer service related to retail finance offerings might bring you additional costs. Try to find a retail finance solution like DivideBuy that handles finance-related queries on your behalf – so you don’t have to stress. 


Offering retail finance boost your conversions, basket value and sales. But it’s important that you weigh up the cost of doing so, so you can make an informed decision that helps your business thrive.  


Not sure what’s right for you? We can help. Why not fill out our quick and easy ‘Book a Demo’ form today? 


Book a Demo

Please note, a minimum turnover of £2.5M and minimum trading period of 24 months is required to offer DivideBuy finance solutions.

Please note, a minimum turnover of £2.5M and minimum trading of 24 months is required to work with DivideBuy.


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