Retailers benefit from credit surge after faster ever start to a year for store credit sector

Analysis from Freedom Finance, one of the UK’s leading digital lending marketplaces, finds that the retail store and online credit sector experienced its fastest ever start to a year in 2022 and looks set to reach further highs.

Monthly updates from consumer finance trade body, the Finance & Leasing Association1 (FLA), show that new business volumes reached £2,120 million in the opening quarter of the year. It marks the highest ever level of borrowing for a Q1, and a double-digit increase of 12% compared to the same period in 2021.

This momentum was sustained early into Q2, too, with all-time high new business volumes for both April (£731 million) and May (£810 million). It puts Q2 2022 on course to follow Q1 in registering the highest ever volume of retail store and online credit for any previous second quarter.

Q2 2022 is also likely to set a record quarterly volume of new business for retail store and online credit in any quarter outside of Q4 – the final quarter of the year typically sees higher volumes than the rest of the year as shopping accelerates following the Black Friday sales and ahead of the Christmas period.

Freedom Finance, which provides embedded financial services to retail brands like Argos, ASDA and Very, said the strong figures demonstrate the high demand for products that offer flexibility and choice at all points throughout the customer journey.

The strong growth in the retail credit market is mirrored across the wider consumer finance market which expanded by 20% in May 2022 compared with the same month in 2021, reaching £10.4 billion.

The data is evidence that the embedded finance revolution is creating an urgent need for retailers, and other sectors, to start providing and widening the range of financial services they offer customers, said Michael Davidson, Chief Revenue Officer at Freedom Finance.

He said: “The retail credit market looks set for accelerated growth as embedded financial services are increasingly becoming the norm to meet the needs and wishes of customers.

“Retail credit allows shops to offer their customers a convenient line of credit, often at the point of sale and on favourable terms,” said Mr Davidson. “Retailers also frequently weave in incentives like vouchers or discounts to encourage repeat business and brand loyalty.

“Demand for easily accessible credit products which offer good terms and can help people manage their finances better is only likely to grow. Retailers will also be expected to start offering a greater variety of financial products to their customers, such as insurance, and embedding these services into their offering will be vital to their success in the future.

“Delivering better finance options for customers at any touchpoint through their journey helps retailers enhance customer experience, build trust and loyalty with potential buyers and maintain relevance in the rapidly evolving consumer credit landscape.”