How to Offer Finance on an E-Commerce Website
With the rise in the cost of living, many people are looking to spread the cost of their purchases over coming months, or make use of buy now pay later methods that allow them to pay at an easier time of year.
More than 17 million UK consumers use buy now, pay later methods when purchasing and 59% of retailers have said that by implementing the method, they have seen better customer acquisition. A huge 43% of retailers using these methods of payment said they have seen customers making more frequent purchases too.
With this in mind, you may be considering how to offer finance on your ecommerce website. It may seem like a daunting prospect, looking into all the different rules and regulations regarding finance, but it doesn’t have to be.
What are the different finance options available?
First of all, you want to think about the different options available when offering finance to customer.
Not only do you have to consider how this finance will be offered, but also what financing options to offer. Do you want your customers to pay in monthly instalments, or can they hold off paying altogether for a set amount of time? If you want to offer payment in instalments, do you want to do this with 0% finance, or with a finance amount added?
Once you have worked out what would be best for your business, you have to consider how to offer the type of finance.
You can offer finance directly through your business, hiring someone to carry out credit checks and financing payments yourself until the consumer pays their way. This can be tricky and poses a little more risk. For small to medium enterprises, you are likely to want to stay away from this option and instead offer finance through a third-party system.
Third-party systems can be integrated into your website with a simple plugin, or through the checkout process already in place. They often come with customisable options for finance that you can pass to your customers, for example 0% finance on instalments for costs over a set price, or a buy now pay in 30, 60 or 90 days options.
Finding the right finance partner
If you want to use a third-party system to offer finance, there are a number of options out there for you.
If you use Paypal to process payments on your website, Paypal Credit may be the easiest option for you. With PayPal Credit you can offer a 0% finance buy now pay later plan on purchases over £99.
The most popular option is the Pay in Three method which allows the customer to pay a third of their cost at checkout, then the remaining two thirds in the subsequent months. This is all carried out through their PayPal account, and you get the money straight away. There are no additional costs to you by offering this payment option, other than those taken by PayPal for processing the payments.
PayPal can be integrated into a website during website development stages, or added to a site later. If you want to switch your payment processing method to PayPal we can help with this, simply get in touch with our team.
V12 Retail Finance
As an experienced website development agency, we have a wealth of experience in V12 finance integration. V12 offers interest free finance loans ranging from 3 to 48 months in length, interest bearing finance loans with terms from 12 to 60 months in length adding between 9/9% and 19.9% interest to a purchase. It also offers a “take 5” system which allows users to pay in 5 monthly instalments, with a fee added to the first payment, and a buy now, pay in 6, 9 or 12 months option.
V12 Finance does have a number of terms that you have to adhere to in order to become a finance partner. These include an annual turnover of more than £1,500,000, a minimum of 24 months trading history and registration with the FCA, unless you are only going to offer up to 12 months 0% finance.
V12 is a plugin, easily integrated with e-commerce sites using WooCommerce, Magento or Shopify, is available on leisure, home improvement, jewellery, furniture, healthcare, musical instrument and season ticket purchases, and has associated costs to buy the plugin, and run the service.
Rising in popularity over recent years Klarna is one of the biggest names in buy now, pay later partners.
Klarna offers three finance options; pay in three, pay in 30 days and financing. Their pay in three acts the same way as PayPal’s does, where users can pay one third at checkout and the remaining amount later. The pay in 30 days option is often labelled as a “try before you buy” option, with the chance for consumers to receive the item, try it out and return it if they aren’t happy with it, without paying a penny. Both of these methods of payments don’t require FCA registration as they are low value amounts with 0% finance that would be paid within 12 months.
The financing option from Klarna allows you to offer a finance load to your consumers of up to 36 Months, with interest built in.
Klarna is easily integrated into WordPress sites working in conjunction with the WooCommerce plugin, it can also be added to BigCommerce, Magento and Shopify based websites. There are fees associated with using Klarna, which will be outlined in your agreement with them, on average there will be up to a 2.9% fee for using the service, plus a 20p transaction fee.
Do you have to be FCA registered to offer finance?
No matter which option of offering finance you go for, in most cases, you have to be registered with the FCA (Financial Conduct Authority).
You also have to have a breakdown of what the offer for your customers is on your website, so that they understand what the process means and how the money is paid back, whilst adhering to the requirements the FCA lays out.
There are some exceptions to being registered, and they include if you offer payment through a credit card which is owned by the consumer, or if you allow a consumer to spread payment costs over less than four payments, within a year of purchase. Therefore Klarna can be offered though a site with no FCA registration.
How do you know finance is right for your business?
Whilst there are studies that show that offering finance is great for customer retention and for generating more sales, there are downsides associated with it.
Financing will come at a cost to your business. You will have fees to pay and these may not always outweigh the increase in sales. There could be risks associated with financing if you offer it in-house and more complexity for accounting when you come to tally up the numbers.
Finally, you will have to work out if the financing is worth the extra work for your site. There will be design and integration work that needs to be carried out to get the process working for you, if you go for an option that only accepts finance for transactions over £99 like PayPal credit, and the majority of your orders are for £25, then the work to implement the finance will be wasted.
How to offer finance on your e-commerce website
If you want to offer finance on your website and don’t know where to begin, take a look at the third party integration options available to you, then speak to your website developer about the options. They can help you add any required plugins and amend any designs on your site to ensure that your customers are aware of the finance options available.
If you want to offer finance on your website and don’t know where to begin, then get in touch or just a give us call on 015395 64580 and we will be happy to help where we can! Alternatively take a look at the third party integration options available to you, then speak to your website developer about the options. They can help you add any required plugins and amend any designs on your site to ensure that your customers are aware of the finance options available.
At BFI we are specialists in bespoke ecommerce websites and can help you build the platform you need to drive sales. If you have an ecommerce website that needs a redesign or would like to integrate a finance option to your existing site, give us a call and we can discuss your needs.