UK Point of Sale Finance (including Buy Now Pay Later): 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.

This report addresses questions on the 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?

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..