Retail Finance industry?

[sdott]

Hi,

So I'm just wondering if what I'm talking about has been done to death, what kind of steps you think a company would need to do to get into this industry.

So there are about 10 decent sized websites based in the UK offering products in the £750-2000 range. 2 of these companies offer an option to purchase their products on finance, so over 36 months with interest on top.

My question is - how would I go about offering finance options for the other 8 websites. I would be a broker between the bank and the website. Or would I need to find a retail financing company, and offer to be a broker between them and these websites? I have a few ideas for this, but not sure if it's a viable route to go down.

Any input is appreciated!

 

[businessfunding]

Presumably these are b 2 c sites?
Offering credit in an online process can be very counter-productive as it slows the buying process and creates admin - many buyers can pay £2000 on card which is quicker and easier for all

What do you feel you would add as a broker

If you go ahead, the first step will be to get a consumer credit licence and get some lenders on side.

 

[sdott]

Presumably these are b 2 c sites?
Offering credit in an online process can be very counter-productive as it slows the buying process and creates admin - many buyers can pay £2000 on card which is quicker and easier for all

What do you feel you would add as a broker

If you go ahead, the first step will be to get a consumer credit licence and get some lenders on side.

Thanks for the reply.

Yes, B2C sites. I would like to roll this out to offline businesses too, but I understand the process for trying to get credit online through a store.

Buyers who can afford to put £2k on a card will do so, however those who can't afford to pay off the balance in full the next month or don't want to pay the high CC interest rates would go for finance. Just how people purchase a car on finance. I guess it works the same way with furniture companies. A lot of people are buying sofas on finance for example.

As a broker we could increase sales. Someone who can't afford an item for £2,000 can break it down into monthly payments. If a site owner didn't have a finance option in place that's a lost sale. It's a no brainer for the site owner.

So I'm not sure of the best way to go about it. Do I broker between the consumer and the lender, I take a fee, and the consumer pays the lender directly and the lender handles it all. Or do I collect payment on behalf of the consumer and pay the lender while taking our %.

Again, this is an idea I had a couple days ago, thought I'd post on here to get some talk going!

Thanks.

 

[businessfunding]

Thanks for the reply.

Yes, B2C sites. I would like to roll this out to offline businesses too, but I understand the process for trying to get credit online through a store.

Buyers who can afford to put £2k on a card will do so, however those who can't afford to pay off the balance in full the next month or don't want to pay the high CC interest rates would go for finance. Just how people purchase a car on finance. I guess it works the same way with furniture companies. A lot of people are buying sofas on finance for example.

There is a significant difference between harnessing showroom customers and harnessing web customers - the furniture showroom has a huge advantage and will mostly operate 'instant acceptance' while the customer wanders the shop & drinks coffee

Your cost comparisons are askew - most people would repay £750 on CC over 4 or 5 months, which is still significantly cheaper than a 3 year loan.

As a broker we could increase sales. Someone who can't afford an item for £2,000 can break it down into monthly payments. If a site owner didn't have a finance option in place that's a lost sale. It's a no brainer for the site owner.

My question was really what will you add as a broker - in particular against them affiliating directly to a lender?

So I'm not sure of the best way to go about it. Do I broker between the consumer and the lender, I take a fee, and the consumer pays the lender directly and the lender handles it all. Or do I collect payment on behalf of the consumer and pay the lender while taking our %.

Typically as a broker you will process the deal pass it to an appropriate lender and sort out paperwork - the lender will pay you either a nominal finders fee, or provide you with a commission scale to sell to the customer.

Again, this is an idea I had a couple days ago, thought I'd post on here to get some talk going!

Thanks.

These are low value transactions - what sort of commissions would make it viable for you?

 

[elraymonds]

£750-2000 range? dont you think its too much

 

[sdott]

There is a significant difference between harnessing showroom customers and harnessing web customers - the furniture showroom has a huge advantage and will mostly operate 'instant acceptance' while the customer wanders the shop & drinks coffee

Online stores offer instant acceptance too. The form will take 3 minutes to complete, and a decision reached within a minute, according to these two websites that offer credit, and the majority of other websites that offer credit also (from what I've researched).

Your cost comparisons are askew - most people would repay £750 on CC over 4 or 5 months, which is still significantly cheaper than a 3 year loan.

This is for people who don't want to use a credit card, who can't, or just want to pay in smaller installments over a longer period. £750 doesn't sound like a lot, but there are lots of items in this specific industry selling for £1500 or so, which is a decent chunk of money.

My question was really what will you add as a broker - in particular against them affiliating directly to a lender?

This was something I considered. Why would they go through a broker when they can approach a lender directly. Why haven't they done that already? If we approach the website, they could think to go over our heads and go direct with the lender. However this is us going to them. Offering the terms, pitching the product.

Typically as a broker you will process the deal pass it to an appropriate lender and sort out paperwork - the lender will pay you either a nominal finders fee, or provide you with a commission scale to sell to the customer.

Alright, great. Lower ticket items would work better for a flat finders fee, although items worth £5k+ would be best for commission.

These are low value transactions - what sort of commissions would make it viable for you?

I'm looking at a product now. The item costs £1500. With a 10% deposit, and repayment over 24 months, the customer is looking to pay £1837. I thought around £50 commission? I'm not sure if this is a normal figure for what I am suggesting. Once the initial contract has been signed with the website, costs are low.

 

[businessfunding]

My point remains that broking adds a tier of cost and administration

To add value you need to make things easier, cheaper, quicker or somehow add value

On the basis that you have no knowledge or contacts in the lending market I really can't see what you are providing.