16 February 2022

A credit decline does lasting damage to online retailers’ customer relations

YouGov survey shows the majority of customers online rejected for credit would shop elsewhere - and a quarter would never come back

A failed online credit application has a big impact on drop-off rates for online retailers, but the potential damage is more long-term. The majority of customers rejected for credit by an online retailer would be upset by the experience and change their attitude towards that retailer (60%). Those sentiments were stronger when people had previously been rejected for credit (64%). Over 6 in 10  would also be likely to consider a competitor, and nearly a quarter (23%) would never go back to that first retailer.These are among the top findings from a new online YouGov survey of UK attitudes towards the online credit offered by retailers:

  • 8% said it would affect their mental health. That figure rose to 16% among people who had previously been rejected for credit.
  • 62% of respondents were likely or very likely to consider a competitive retailer for a similarly priced item if they were rejected for credit by the original retailer’s finance provider.
  • Among respondents who had been previously rejected, 70% said they were likely or very likely to consider a competitor for a similar purchase.
  • 37%% of respondents would change their attitude towards a retailer if rejected for credit and a further 23% of respondents would not go back to that retailer at all if their finance application was rejected.

Dr Heather Kappes, Associate Professorial Lecturer in the Department of Management at the London School of Economics and Political Science, studies consumer behaviour and marketing.
She said:

Because people view brands as relationship partners, companies can’t afford to drive customers into competitors’ arms. However, in an age of easy credit, there can be tension between making customers happy and being responsible. There is clear value for retailers in partnering with a financing company that helps them walk this fine line. These partnerships can contribute to customer-retailer relationships that become long-term commitments rather than flings.
Dr Heather Kappes

Robert Schuijff, CEO at etika, an ethical finance provider that sponsored the survey, said:

Retailers want to help potential customers get the products they want, with finance they can manage. But too often the finance application process is binary - accept or decline. The hard credit search leaves a mark on that applicant’s credit history but what’s worse, this YouGov research shows that a decline can have huge impact on that customer’s willingness to engage with the retailer for that particular sale - or ever again.

By contrast, when retailers tell customers what their credit budget is following a soft credit check, it saves a large number of customers from a hard credit decline. The improved customer journey reduces drop-off, which increases sales conversion, and the reduction in hard credit checks means less damage to customers’ credit histories. In fact, helping customers to build a positive credit history boosts their financial health - 92% of etika customers sampled had an improved credit score after utilising etika’s finance that fits! Furthermore, we don’t have late fees or any hidden costs or conditions, all of which is central to our ethical approach.
Robert Schuijff

etika operates in the high-ticket, long-term end of the UK retail market, where many potential customers unfortunately fail to get the finance they need. The company has a unique combination of people, technology and ethical approach that brings together product, customer and finance.By ensuring that its initial soft search does not affect a customer’s credit history, with one retailer etika was able to cut the number of hard-search rejections by 88%.  The company is already working with a range of leading UK companies including DFS and Vitality.
Other highlights from the research:

The two biggest barriers to applying for 0% interest credit (purchases of £500+) were the assumption of hidden fees (15%) and concerns around the effect on credit scores (12%).

But of respondents who had been previously rejected for finance, 21% noted fear of the impact on their credit score as a main barrier, and 21% cited fear of being rejected.

Notes for editors

The YouGov survey was based on a sample size of 2,149 adults from the United Kingdom, of which 1,027 were male and 1,122 were female. The fieldwork was undertaken 18 - 19  October 2021 and was carried out online. The figures have been weighed and are representative of all UK adults (aged 18+).

etika has a mission to provide fair and responsible finance to more people. It is a privately-owned and technology-driven company making a positive difference in the world of finance. By working with selected retailers, etika can offer customers finance that fits their circumstances without any late fees, hidden costs or conditions. etika currently operates in the UK, Australia and New Zealand. To find out more about etika’s values, products, and how to sign up visit etika.com or follow us on Linked-In.

etika (a trading name of etika Finance UK Ltd) is a company registered in England and Wales 07440512 and authorised and regulated by the Financial Conduct Authority, registration number: 697658. Company address: Jactin House, 24 Hood Street, Ancoats, Manchester, England, M4 6WX. Copyright © 2021 etika. All rights reserved. Consumer credit history includes details such as the amount of a loan, outstanding amounts  and any missed payments. This information is listed in a credit report and could impact a lender's decision to provide consumers with credit in the future.

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