Most merchants are familiar with the benefits of checkout finance. Higher average order values, increased repeat spend, lower basket abandonment, a boost in customer lifetime value. The list goes on.
But if you’ve implemented your own retail finance programme, it’s likely you’ve come across some of the negatives, too. Things like:
- Losing ownership of your customer
- The risk of one lender owning the entire loan portfolio
- The cost & complexity of offering finance across multiple markets
In this article, we’ll explore the three biggest issues facing large merchants today and see how Divido can solve them.
1. Losing ownership of your customer
Let’s say you’ve picked a well-known provider for your retail finance programme. The provider features at your checkout, and your brand features within their shopping app.
When your customers choose to pay for their items with retail finance at your checkout, they are asked to create an account with the finance provider. After a short form, they’re on their way. They may even download your provider’s app.
You are paid by the lender and your customer receives their goods. Transaction complete, for you.
But for your customer, the journey has only just begun. It’s likely, after completing their transaction, they will start to receive emails incentivising them to shop again on the finance provider’s app.
These apps feature thousands of merchants, and yours is only one of them. Your brand will appear, but only alongside dozens of your competitors, with all of your respective products organised together into categories like fashion, electronics and furniture.
This is great from a consumer’s perspective. Shoppers can browse thousands of merchants at once, find brands they’ve not seen before, and get the best price for the items they’re buying.
It’s great for the provider, too. They get paid a transaction fee every time someone uses their service. The more people who buy from within their app, the more money they make.
But for you, as a merchant, things are less rosy.
Positioned next to your competitors, you find yourself in a race to the bottom. Your brand may be strong, but why would a customer buy from you if they can get the same thing cheaper using the merchant next door to you?
Because of the threat of losing your customers to your competitors, you may be tempted to reduce your prices to stay competitive. Your margins, which were thin enough to begin with, shrink even more.
Signing up to a popular finance provider may seem like a good idea, but you may end up funnelling your customers towards their retail space. Ultimately, the customers you worked so hard to acquire may end up becoming your competitors’ customers too.
2. The risk of one lender owning the entire loan portfolio
Next up is the risk of putting all your eggs in one basket.
Having a single lender to manage your entire retail finance programme can cause major issues to your business, if your lender pulls out of the market. It may sound like scaremongering, but this has happened a few times recently. Difficult trading conditions are putting pressure on lenders and some are leaving the UK sector as a result.
Where does this leave merchants? Tight for time and out-of-pocket.
Finding another lender, negotiating commercials, integrating the solution and training your staff takes considerable time and money. If you require a bespoke integration, it will take even longer and cost even more.
All of this needs to happen within your notice period to avoid disruption to your finance offering. There is a real risk that you may have to put finance on hold if you cannot get things sorted in time. That lost time during the change-over period could end up costing you valuable sales.
By putting all your faith in one lender, there’s also a chance you’ll see lower approval rates. Your lender may change their risk appetite suddenly for any number of reasons – the macroeconomy being one of them. A more cautious lender means fewer customers will be approved for finance, which is likely to impact your sales.
Diversifying your risk profile is essential, not only to maximising the effectiveness of your retail finance programme, but to ensuring your security too.
Choosing to work with multiple platform providers is one way to mitigate risk, but this can add complexities – especially for your customers, who may not know how and where to find the best deal at your checkout.
Choosing a multi-lender platform is another way to offer multiple lending programmes, but with the benefit of doing it all from a single integration. With a multi-lender platform, you’re also protected in case a lender drops out of the market or changes their risk profile, because you can quickly and easily switch to another. In the end, you get lower complexity, lower risk and better security.
3. The cost & complexity of offering finance across multiple markets
Another big problem for large merchants is the difficulty of offering retail finance in multiple markets.
There are very few single lenders that operate in all core European markets, including the UK. Most European lenders do not offer lending in the UK, and most UK lenders do not offer lending in any of the European markets.
What does this mean for merchants?
In short, it means you’ll need a different integration for every lender in every market. That means you’ll need a bigger team to manage those integrations and an in-depth local knowledge for each market.
This drives up costs and complexities. Multiple integrations means multiple fees and multiple issues to deal with. The problem is exacerbated when we look at the state of global regulation and remember that you, as a merchant, must stay on top of multiple ever-changing strategies.
Having a single platform where you can access both, should save you time and money when it comes to running your finance programme across multiple markets.
How can working with Divido solve these problems?
1. White labelled retail finance
With our white labelled retail finance, you’re in control of the buying journey. Your brand takes centre stage, and you take ownership of your customer data and checkout experience.
We only work with financial institutions whose primary goal is to lend money – not to build consumer marketplaces.
This means that you can work through a platform that offers established traditional lenders, who have no interest in riding the coattails of your direct to consumer strategy.
You also won’t have to worry about any negative associations with much-derided fintech lenders, who are prone to bad stories about them in the press.
2. Multiple lenders
We have multiple lenders on our books, so you’ll never be without one. This also means you can switch lenders if you’re not getting the acceptance rates you need, to another who may be more willing to lend in your industry.
Novuna and Oney, for example, are specialist lenders whose primary focus is to provide credit, while HSBC and Nordea are three of the biggest banks in Europe. We can offer a range of services as a result.
3. Single point integration for multiple markets
Another issue for merchants is taking their retail finance proposition overseas. A merchant may market their products internationally, but will only be able to offer finance in the UK. Lending overseas can open the door to huge international growth – the problem is meeting the complex standards of international regulation. Lending abroad may involve a long and expensive legal process, as your business fights to become compliant. That process is repeated for each new territory you wish to enter.
Divido is currently developing its platform to meet this need for merchants. By partnering with top lenders worldwide, we will soon be able to offer merchants to lend across multiple territories using a single platform.
That takes away all the legwork for you. We’ll connect you with lenders abroad who are already compliant with their countries’ regulatory frameworks, letting you get on with selling and lending.
So, with a single integration, you can access millions of customers in international markets, and offer them the same standard of customer care you provide in the UK.
The bottom line
At Divido, our story is defined. We started our journey working with lenders. Now, we’re building the network to solve for the technical pain of multiple integrations.
If you want more control, Divido’s white labelled solution can provide it. We can offer you multiple lenders from day one, with Novuna and Duologi in the UK, and another major global bank coming soon. We can also connect you to Nordic markets via Nordea.
The profile of lenders we work with, and the access to the markets that our lenders provide, differentiates us from other players in the market.
If you’d like to learn more about Divido’s white label retail finance platform, you can catch up with Jack at this year’s Merchant Payments Ecosystem in Berlin. You can book a meeting directly, or reach out to Jack at [email protected].