Top 5 Retail Finance Alternatives in the UK

Smarter Ways to Offer Retail Finance in the UK

Retail finance is now a pivotal part of the customer journey in the UK. Whether you are selling e‑bikes, furniture, home improvements or luxury goods, flexible payment options can lift conversion, increase average order values and reduce basket abandonment. If you are exploring alternatives to a traditional broker model, a number of credible providers can power checkout finance directly or via integrations with your ecommerce stack and POS systems.

The five options below represent a cross section of the UK landscape, from established consumer lenders to high‑visibility pay later brands. Each brings different acceptance policies, fees, settlement times and customer experiences. Knowing the differences matters. A home improvement retailer, for example, may prioritise higher credit limits and staged drawdowns, while a fashion merchant may want instant approvals and rapid repeat purchases. Your choice will influence margins, cash flow timing, chargeback exposure and compliance workload.

It is also about customer trust. Big consumer names can encourage sign‑ups, but they may come with tighter underwriting for higher‑value baskets or stricter marketing rules. Specialist lenders tend to support larger ticket sizes, but may require deeper integration or enhanced documentation. The right fit hinges on your category, risk tolerance and growth plans.

A well‑matched finance partner is a revenue lever, not just a payment add‑on.

Below, we break down five credible alternatives operating in the UK, the benefits they can unlock, where they differ, and how to integrate them with minimal friction. Use the tables and checklists to benchmark costs, approval dynamics and operational impact before you commit.

Who Benefits Most From These Options

Retailers that sell mid to high‑ticket items will often see the strongest lift from embedded finance, thanks to affordability spreading and improved price acceptance. That includes furniture, cycles and e‑bikes, tech, home improvements and jewellery. Multi‑channel merchants with physical stores can also use finance to standardise pricing and promotions across branches and ecommerce, driving consistency.

Fast‑moving consumer categories benefit too, especially when returns are low and repeat purchase rates are high. If your audience is price sensitive but creditworthy, pay later products can create a smooth path to purchase without heavy discounting. Finally, growing brands looking to expand average order value or reduce dependency on seasonal sales can use finance as a structural lever, not a short‑term tactic.

Key Terms You Should Know

• APR: Annualised cost of borrowing to the customer, including fees.

• Representative APR: Typical rate shown in advertising where required by regulation.

• BNPL: Buy Now, Pay Later products with short interest‑free periods.

• 0% finance: Interest‑free instalments funded by the retailer via a subsidy.

• Soft search: Credit check that does not impact the customer’s credit score.

• Hard search: Full credit check that may leave a footprint on the credit file.

• MDR: Merchant discount rate or fee applied to the retailer per transaction.

• Settlement: How and when the lender pays the retailer after an approved sale.

• Chargeback: Customer dispute reversal risk, usually lower with finance than cards.

• FCA compliance: UK regulatory requirements for advertising and onboarding.

Five Strong UK Alternatives To Consider

1. Novuna Consumer Finance - Well‑established lender with robust underwriting, wide product set from 0% to classic credit, strong for higher baskets and home improvements.

2. V12 Retail Finance - Popular in cycles and furniture, offers interest‑free and interest‑bearing plans, broad integration support and reliable merchant settlement.

3. Duologi - Flexible mid‑market specialist, competitive approval rates, customisable finance plans and good merchant support for omnichannel deployments.

4. Klarna - High‑recognition BNPL brand, smooth UX, soft credit checks for short‑term plans, strong conversion lift for fashion and general retail baskets.

5. PayPal Credit and Pay in 3 - Leverages PayPal’s wallet footprint, quick approvals, seamless checkout, useful for online merchants seeking reach and trust.

Pick two short‑listed providers and A/B test for 30 days.

Cost, Returns, Risks and Operational Impact

Are You Eligible?

Most UK retailers can access one or more of these providers, but approval depends on your trading history, chargeback profile and the nature of your goods. Regulated credit agreements typically require you to meet responsible lending and disclosure standards, and you may need FCA permissions depending on how you promote and introduce credit. High‑risk categories or services with variable fulfilment may face stricter checks or require additional evidence of robust customer service processes.

Expect to share company financials, VAT and Companies House details, product catalogues and refund policies. If you are new to finance, start with a simple product such as interest‑free over three to six months, then add longer terms when your acceptance rates and arrears performance are stable. Providers will also assess your website journey, ensuring pricing, terms and key information are prominent and compliant.

From Signup To Go‑Live

1. Define target baskets, terms and subsidy budget.

2. Shortlist two providers aligned to your category.

3. Apply and complete KYC and underwriting.

4. Integrate APIs, plugins or POS modules.

5. Configure plans, limits and settlement settings.

6. Train staff on disclosures and customer handover.

7. Soft‑launch with limited SKUs and monitor metrics.

8. Expand terms once approval and arrears stabilise.

Pros and Cons At A Glance

Before You Commit

Check the total cost of finance relative to your current discounting strategy. A 10 percent promotional discount could be more expensive than a 6‑month interest‑free subsidy, but only if your take‑up and return rates behave as expected. Review how each provider handles partial refunds, cancellations and replacements, because home categories often need split settlements. Ensure your adverts and checkout disclosures meet UK rules on prominent representative examples and eligibility wording. Finally, plan for customer support peaks after payday and during promotions, as finance queries often rise with traffic.

Other Routes You Could Take

1. Laybuy or Clearpay for fashion‑led BNPL with strong shopper adoption.

2. Payl8r for flexible affordability in mid‑market ecommerce verticals.

3. Omni Capital Retail Finance for higher‑ticket home and leisure sectors.

4. DivideBuy for interest‑free instalments with rapid onboarding for SMEs.

Frequently Asked Questions

Q: Will using multiple providers hurt conversion? A: Not usually. Routing rules can steer customers to the best fit by basket size and credit profile, improving approvals.

Q: Do I need FCA authorisation? A: It depends on how you introduce and promote credit. Many regulated agreements require permissions. Get compliance advice early.

Q: How much does 0% finance cost a retailer? A: Subsidies often range from low single digits to low teens percent, depending on term length and risk.

Q: What about returns and cancellations? A: Providers typically adjust the loan and claw back settled funds. Know the timelines and any admin fees before launch.

Q: Does BNPL affect customer credit scores? A: Short interest‑free plans may use soft checks, but missed payments can still impact credit. Longer terms often use hard searches.

Q: Can I offer finance in‑store and online? A: Yes. Most providers support POS terminals or web portals alongside ecommerce plugins and APIs.

Where To Go From Here

Shortlist two providers that match your average basket and risk profile, then run a limited pilot with clear KPIs for approval rate, AOV, and return‑adjusted margin. Keep the pilot tight, measure weekly, and expand only once the data supports the business case.

Important Information

This article provides general information for UK retailers and is not financial or legal advice. Always consult the provider’s terms and seek professional guidance on FCA permissions, advertising rules and customer affordability checks before implementing retail finance.