UK businesses are being unknowingly short-changed out of sales revenues – by as much as 40% – due to poor practices employed by consumer credit lenders, a new research report has found.
The study, compiled by Duologi, looked at the biggest frustrations that consumers face when borrowing funds to purchase goods and services on credit. It revealed an array of barriers that could be having a hugely detrimental impact on sales across a range of consumer-facing business sectors.
Over half (56%) of people said they have experienced high interest (APR) rates when applying for credit, whilst 28% of consumers have not been provided with full transparency when it comes to their loan; experiencing hidden or unexpected charges during application or at repayment stage.
Crucially, these consumer frustrations are causing a high degree of shopping basket abandonment. If encountering any of the issues highlighted above, 40% of people would abandon their purchase. This increases to 49% amongst the 25-34 millennial age bracket, which now comprises more than a quarter of the UK’s population, bringing with it considerable spending power.
The research also asked consumers exactly what they are calling out for when it comes to point-of-sale (POS) finance.
Interestingly, a third (33%) of people want to know that their finance is coming from a reputable place but are not concerned about whether this is a recognisable bank name. In fact, one in five (20%) people said they would no longer trust a loan from a bank, following revelations seen in the wake of the financial crisis.
Three quarters (75%) said that the option of 0% interest would be an important consideration when buying on credit. Interestingly, this figure increases to 81% of people who earn more than £40,000 – highlighting that credit options are not just a way to cater for low earners.
A further 40% of people said a quick and easy process would be top of their list of desirables, while 37% of people said low monthly repayments would be the most important factor.
Almost half (46%) of people think that POS finance should be available both online and instore, and one in five (21%) said that this flexibility of channel would be an important consideration when buying on credit. A further 28% of people think that getting an immediate decision on whether they can borrow would be very important to them.
Duologi credit director, Rob Cottingham, commented: “Borrowing on credit is often purported as a simple way to access funds. However, many lenders are clearly still getting the process wrong and this is leading to consumer frustrations which are potentially having a fatal knock-on effect for UK businesses.
“For merchants, whose sale of products and services rests on the ability of consumers to access additional cash, this is a huge problem. The retail industry in particular has seen its fair share of turmoil in recent months, with store closures and falling profits hitting the headlines on a near-daily basis. In these challenging times, it’s more important than ever that merchants find ways to offer flexible, transparent and easily-accessible funds.”