Retail finance is an excellent way to increase average order values and boost sales. However, it also comes with a certain level of risk that needs to be mitigated. For example, fraudulent credit applications could result in you losing money if your provider can’t collect instalments, or tech issues due to high volumes of applications might mean you lose out on sales.
Either way, a good retail finance provider will take measures to ensure you’re protected from risk, especially during busy times when you need extra help.
We asked our Retailer Risk Manager, Aman Johal, to explain how we’re insulating our merchants and customers from risk, even when demand is high.
While the term ‘risk’ can universally be defined as potential danger or threat, in retail finance, risk is uncertainty around a possible event occurring that could lead to an operational and financial loss.
So what does this mean in practical terms – and what has it got to do with retail finance?
A good retail finance provider will manage risk by identifying, analysing and mitigating risk to minimise any negative outcomes for merchants and customers.
For DivideBuy, the first step to mitigating risk means ensuring we onboard merchants who are financially stable, meet our criteria for partnership, and share our customer-centric values.
The age-old saying of ‘customer is King’ is tricky to apply in retail finance, where both the merchant and their consumers are ‘the customer’. This is especially true where conflicting interests are concerned – for example, addressing potential fraud and risk issues.
DivideBuy offers a balanced approach to helping both. We offer customers flexible ways to make payments over a certain period, as well as performing a credit risk assessment to assess their creditworthiness before approving any transaction. This protects both merchants and customers by minimising risk around non-payments or defaults.
We also provide robust customer support services to address inquiries and concerns promptly, which contributes to a safe and positive experience for all parties.
Failing to sufficiently prepare for risk-related incidents ahead of busy sales seasons is a recipe for disaster. During peak sales seasons (such as holidays or major shopping events like Black Friday), we put additional technical infrastructure and customer support in place to handle the surge in transaction volumes. This means whether it’s a software issue or a customer query, we’ve got your back.
Our Retailer Success team also works closely with our merchant partners to address any issues they may have leading up to or during peak season. This could include adjusting minimum spend thresholds, tightening up software, or monitoring for potentially fraudulent applications.
There are various approaches to managing risk in retail finance, especially during peak sales seasons. However, a good retail finance provider should have a holistic contingency plan that enables them to have an agile response to expected challenges.