How Offering Finance Can Increase Your Average Order Value

Why Finance at Checkout Makes Business Sense

Retailers across the UK are turning to point-of-sale finance as a way to increase average order value (AOV) and attract a broader customer base. By making higher-ticket purchases more accessible through instalment options, businesses can drive growth without compromising on customer experience.

Who Should Consider Offering Finance?

Offering finance is ideal for UK retailers and service providers looking to:

• Encourage larger purchases

• Stand out in a competitive market

• Serve customers who value flexibility in payment Whether you run an online store, a bricks-and-mortar shop, or provide high-value services, finance can be a powerful lever for growth.

Key Concepts: Understanding Retail Finance

Retail finance refers to the credit or loan products offered at the point of purchase. The most common forms include:

• Interest-free credit: Customers pay in instalments without added interest.

• Buy Now, Pay Later (BNPL): Payment is deferred for a set period, sometimes with no interest accruing if paid on time.

• Interest-bearing finance: Customers spread payments with interest added.

Average Order Value (AOV) is the average amount spent each time a customer places an order. Finance options can improve AOV by making higher-value items more attainable.

Retail finance brokers like Kandoo connect retailers to a panel of lenders, simplifying the process of offering finance and ensuring compliance with FCA regulations.

Finance Options for Retailers

When considering finance products for your customers, you’ll find several mainstream choices:

1. Interest-free credit (typically 6-24 months)

   • Encourages upselling without customer cost

2. Buy Now, Pay Later

   • Popular with younger consumers; can be used for lower-value items

3. Interest-bearing loans (12-60 months)

   • Suited for big-ticket items like furniture, electronics, or home improvements

4. Deferred payment plans

   • Customers pay nothing for an initial period, then repay in instalments

Each option has distinct appeal. For example, interest-free credit is highly attractive but may involve higher subsidy costs for the retailer. BNPL is frictionless and fast but requires robust credit checks to minimise risk.

Impact on Costs, Returns, and Risks

Cost:

• Retailers may pay a subsidy or commission to the finance provider, typically a percentage of the transaction.

• Setup and integration fees can apply.

Returns:

• Studies suggest AOV can rise by 15-30% with finance options.

• Conversion rates also generally improve, as customers are less likely to abandon their baskets when flexible payment is available.

Risks:

• If not managed well, finance can increase customer debt and complaints.

• Regulatory compliance is essential. Non-compliance can result in fines or reputational damage.

Eligibility, Requirements, and Conditions

To offer finance, you will generally need:

• FCA authorisation (or to become an appointed representative)

• Minimum trading history (often 12+ months)

• Sufficient average order values (typically £250+)

• Evidence of financial stability

Finance providers may also review your business’s creditworthiness. Some brokers, like Kandoo, can help businesses meet these requirements and handle compliance.

How to Set Up Retail Finance: Step-by-Step

1. Research potential finance partners and products

2. Assess your business eligibility

3. Apply for FCA authorisation (or partner with an authorised broker)

4. Integrate finance options into your checkout

5. Train staff or update customer support processes

6. Promote finance availability to customers

7. Monitor performance and customer feedback

8. Adjust terms or partners as needed

Pros and Cons to Weigh Up

Pros:

• Boost AOV and conversion rates

• Attract new customers

• Enhance brand reputation for flexibility

• Reduce basket abandonment

Cons:

• Costs associated with finance providers

• Administrative and compliance burden

• Potential for customer overindebtedness if not managed responsibly

Careful implementation and ongoing oversight are key to maximising the benefits while mitigating risks.

Before You Decide: Key Considerations

Before launching a finance offering, consider:

• Regulatory requirements: Are you prepared to meet FCA obligations and treat customers fairly?

• Customer suitability: Is your typical customer likely to use finance responsibly?

• Technology and integration: Can your website or POS handle seamless finance checkout?

• Staff training: Are your team ready to explain finance clearly and compliantly?

A responsible, transparent approach builds trust and long-term loyalty.

Alternatives to Point-of-Sale Finance

If you’re not ready for formal retail finance, consider:

• Layaway schemes: Customers pay in instalments before receiving goods

• Simple payment plans (non-credit): Spread payments over a short period without a credit agreement

• Credit card partnerships: Offer incentives for using third-party credit cards

• Vouchers or loyalty schemes: Encourage repeat purchases without credit risk

Each has its own pros and cons, but none offers the same immediate uplift in AOV as regulated finance.

Frequently Asked Questions

1. How much can finance increase my average order value?
Many retailers report AOV increases of 15-30%, but results vary by sector and product type.

2. Is offering finance expensive for retailers?
There are costs involved, typically a percentage of each financed sale. However, these are often offset by increased sales volume and order size.

3. What are the FCA requirements?
You must be authorised or an appointed representative, and follow rules on transparency, responsible lending, and customer treatment.

4. What if my customers default?
The finance provider manages the risk and collections, so you usually receive payment upfront.

5. Can I offer finance both online and in-store?
Yes, most finance solutions can be integrated across sales channels.

6. How long does setup take?
With a broker’s support, you can usually launch within a few weeks.

Next Steps: Ready to Offer Finance?

If you want to raise your average order value and stay competitive, explore partnering with an experienced retail finance broker. Assess your eligibility, compare providers, and ensure your team is ready to support customers responsibly. A well-implemented finance solution can be transformational for your business.

Disclaimer

This article is for informational purposes only and does not constitute financial or regulatory advice. Always consult an authorised broker or compliance expert before making changes to your business’s finance offerings.