UK Point of Sale Finance Market Insight Report 2021



Published: Apr 2021
Pages: 58
Format: PDF / conf call






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Point of Sale Finance Market Insight Report 2021


This report focuses on the UK market for point of sale, or POS, finance. Also known as retail finance, in-store credit, store instalment credit or Buy Now Pay Later (BNPL), it refers to loans provided by, or on behalf of, a retailer to enable a consumer to make a specific purchase.

This new edition of the report has been updated and extended to take into account recent growth in the market and to revise our market size estimates.

The report quantifies the market size in loans outstanding, new lending and loan provider revenues, historical growth rates and levels of industry profitability.

Objectives of the report

This report aims to answer a series of questions on the POS finance market:
– How does the market work? What changes have there been recently?
– What would be the impact of an interest rate rise?
– Which types of retailers use it most frequently?
– How does it compare with alternative and substitute forms of finance?
– What role has new technology played in the market?
– What is the market size and historical growth rate, in terms of total loans outstanding, new lending and lender revenues?
– What are the risks to future market growth?
– How does the market compare with those in other countries?
– Who are the main finance providers and principals, which are most widely used by retailers, how have they performed?
– In simple terms, what do they each do, who do they work for and how do they operate?
– What do the leading UK retailers do – to what extent do they use this form of finance, how do usage patterns vary by sector, which providers does each use and what is the extent of churn?

Market background

Point of sale (POS) finance – also called retail finance, in-store credit or store instalment credit – refers to fixed-term loans provided by, or on behalf of, a retailer to enable a consumer to make a specific purchase.

It includes purchases of goods from high street stores and online as well as purchases of services from medical, beauty or other providers

Many retailers choose to subsidise the cost of the credit as a promotional expenditure and offer “interest-free credit” or “zero per cent finance”.

It is used by both national retail chains and independent shops, most commonly in the home and furniture, jewellery and electricals sectors.
– Loans are generally set up as personal loans, not secured on the asset and without a lease arrangement.
– Interest-free loans are generally for 3-12 months with an APR of 0% (i.e. no additional fees are charged)
– Charged-for loans are generally for periods of 12-60 months with an APR of 15-20% being typical.

Some retailers offer both fixed-term, product specific POS alongside revolving credit such as store card accounts

Until recently, purchases needed to be over £200in value for POS finance to be viable, given fixed set-up costs.  But, in the last couple of years, there has been growth in smaller and shorter-term interest free offers, with minimums as low as £30.

Market growth and drivers

The market for POS finance has grown quickly in recent years with new lending having approached £15bn in 2019.

The combined revenue of leading lenders was around £1bn in 2019

It has been driven by trends in a range of demand and supply factors, including:
– Ongoing retail sales growth
– Growth of online sales, where POS penetration has recently increased significantly.
-The appetite of consumers for purchasing the kinds of items which tend to be financed in this way, which is likely to be related to the overall level retail sales but with more of an emphasis on discretionary purchases (big ticket leisure items) and furniture
– Consumer confidence in driving larger, discretionary purchases
– The overall performance of the economy as a driver of both retail sales and consumer confidence
– The availability of this form of credit, influenced to an extent by overall unsecured consumer borrowing levels
– Pricing of POS finance loans, particularly the current wide availability of interest-free deals.
– The recent launch of interest free ‘split payment’ facilities
– The impact of technology on the market with new apps enabling far quicker decision-making and higher application acceptance rates.
– The impact of regulations on the market.

Competitive landscape

The market consists of retailers, broker platforms and lenders.

In addition to most large retailers in the relevant retail sectors, around 9,000 independent retailers, including online-only stores, currently offer POS finance.

Key lenders dealing direct with retailers include Barclays Partner Finance. Close, BNP Paribas (Creation), Hitachi Capital, Ikano Bank and recent entrant, PayPal Credit.

Some larger retailers provide the finance from Group companies, including Home Retail Group and Shop Direct (Argos), often alongside other payment options including store cards. Others may extend the credit themselves but use finance company partners to administer the agreement.

Broker platforms include Deko (Pay4Later), V12 (part of Secure Trust Bank), Klarna and Divido.Some platforms now introduce a retailer’s customers to a single lender, although new entrants appear to be reviving the approach of matching customers to a suitable lender from their panel.

Lenders operating mainly through broker platforms include Conister Bank, Honeycomb, Lending Works, Omni, Paybreak and Secure Trust (via V12).

Amazon has tested POS finance in the UK and is considered likely to add POS credit to its payment options for larger purchases in the medium-term.

Most operators have grown in recent years.

Aggregate margins across the sector grew steadily until 2013, but then fell for several years as firms adapted to deal with more costly regulatory requirements, including some cases involving customer remediation programmes. Profitability increased again last year however.


Prior to the COVID-19 shutdown, our expectation was for growth in the market to continue but at a slower rate than in the past, with the key threat being a rise in interest rates.
– Timing of interest rate rises is impossible to predict, but the Bank of England had clearly indicated that it expected the direction to be upwards.

We also identified several other factors which represented risks to market growth.  These included:
– The then-predicted softening in the UK economy with likely negative impact on retail sales
– Potential for future regulation to designed to dampen down credit-driven retail sales growth
– Risk of significant disruption from a no-deal Brexit

However, the COVID-19 pandemic and consequent closure of much of the economy means our thinking on forecasts no longer applies.

COVID-19 has led to closures of most high street retailers and a significant reduction in overall retail spending and, in particular, large discretionary purchases.

A consequence of this is we expect that, when data becomes available, we will see that there have been much larger movements in many drivers of the market in a short period than there had been in the past few years of relatively normal conditions.

Who is the report intended for?

Operators of point of sale businesses themselves

Investors in these businesses


Market regulators and policymakers

Banks, analysts, consultants and other parties with interests in the sector

What are the sources and methodology?

– Interviews with senior-level contacts in the consumer credit industry
– Research into 50 top UK retailers and their use of POS finance
– A case study on retailers in the city of Salisbury
– Extensive research into published industry sources
– In-depth analysis of the macroeconomic environment and relevant market drivers
– Financial analysis of the accounts of companies in the industry

Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions

About this report 2
Who was the report written by? 3
Summary 4
About Apex Insight 6
Contents 8
About the Market 13
POS finance is consumer credit provided for the purchase of specific goods or services 13
Legal structure of POS finance solutions 14
POS market structure 15
POS products 17
Who offers POS finance? 18
Conventional POS finance via physical stores 18
Conventional POS finance via E-Commerce sites 19
Conventional POS finance via medical and other professional practices 19
Total conventional POS 19
Retailers offering shorter-term POS facilities 19
Local case study: Salisbury 20
Regulation of the POS market 21
Regulatory requirements 22
Obtaining FCA authorisations 22
Possible further changes to regulation 22
POS terms offered by leading retailers 24
Adjacent markets include store cards and credit accounts 27
Store cards and credit accounts 27
Credit cards 27
Personal loans 27
Car finance 27
Small business POS 27
Market size and growth 28
Market size by loan books 28
Market size by volume of new lending 29
Market size by volume of lender revenues 30
Market drivers and forecasts 31
COVID-19 31
Competitive landscape 32
Overall market shares by lender 34
Market share by sectors and leading retailers 35
Brokers 36
Deko 36
Description 36
History 36
Product 36
Financials 36
Key clients 37
Divido Financial Services Ltd. 38
Other brokers 39
Key lenders 40
Barclays Partner 40
Description 40
History: 40
Types of Funding Structures: 40
Financials: 40
Key POS Clients: 40
Description 41
History 41
Financials 41
Key POS clients 41
Clearpay 43
Description 43
History 43
Financials 43
Key Clients 43
Hitachi Capital 44
Description 44
History 44
Products 44
Financials 44
Key clients: 45
Home Retail Group 46
Description 46
History 46
Financials 46
Recent News 46
Ikano 47
Description 47
History 47
Financials 47
Key clients 47
Description 48
History 48
Close Brothers Retail Finance 48
Financials 48
Key clients 48
OMNI Capital Retail Finance Ltd 50
Description 50
History 50
Financials 50
Products 50
Key clients 50
Paybreak Limited (afforditNOW) 51
Description 51
Products 51
Financials 51
Key clients 51
PayPal 52
Description 52
Products 52
Financials 52
Key clients 52
Rematch Credit (DivideBuy) 53
Background 53
Products 53
Financials 53
Customers 53
Secure Trust (V12 Retail Finance) 54
Description 54
History 54
Products 54
Finance 54
Key clients 54
Shop Direct 55
Description 55
History 55
Products 55
Finance 55
Other lenders 57
ApptoPay 57
Auto Serve Finance Limited, 57
Azule Limited 57
Caledonian Consumer Finance 57
Carnegie Consumer Finance 57
First Senior Finance Limited 57
Funeral Safe 57
Laybuy Holdings 57
Lending Works Limited 58
NewDay 58
Pay Later Financial Services (Fly Now Pay Later) 58
PayitMonthly Limited 58
Payment Assist 58
Paysafe Financial Services 58
Premium Credit 58
Propensio Finance 59
Shawbrook Bank 59
Snap Finance Ltd. (Pay Weekly) 59
Social Money Ltd (Payl8r) 59
Specialist Lending Ltd (Duologi) 59
Splitpay 59
Tabeo Broker 60
Tymit Limited 60
Wesleyan Bank 60

List of charts and tables

POS finance market definition 13
Point of sale (POS) finance channels 15
Number of independent stores offering POS finance 18
Usage of POS finance by Salisbury retailers 20
Key FCA regulatory requirements relevant to POS finance 22
POS terms offered by leading retailers 25
Loan book size of leading POS loan funding providers / £m 28
Total market new POS lending / £m 29
Total market POS gross revenues / £m 30
Pay4Later Ltd. summary financials 36
Clydesdale Financial Services Ltd summary financials 40
Creation Consumer Finance Ltd summary financials 41
Hitachi Capital (UK) Plc summary financials 44
Home Retail Group Card Services Ltd. summary financials 46
IKANO Bank AB summary financials 47
V12 Retail Finance Ltd summary financials 54
Shop Direct Finance Company Limited summary financials 55

    To talk to us directly about the report, or to ask a specific question, please telephone: +44 20 7100 7239


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