The Retail Finance Knowledge Hub
Retail Finance & Payment Terms Glossary.
This retail finance glossary provides plain-English definitions of retail finance, BNPL, and point-of-sale payment terms for merchants.
For business purposes only.
A
Affordability Assessment
An affordability assessment checks whether a customer can realistically afford repayments without experiencing financial difficulty. Lenders consider income, regular outgoings, and existing credit commitments to support responsible lending decisions.
AOV (Average Order Value)
AOV is the average amount a customer spends per transaction. It is calculated by dividing total revenue by the number of orders and is often used by retailers to measure the impact of payment options and promotions.
B
Buy Now Pay Later (BNPL)
Buy Now Pay Later allows customers to spread the cost of a purchase into instalments rather than paying the total sum upfront. BNPL is typically offered to shoppers at the checkout and is often interest-free, although interest-bearing plans may be offered depending on the provider and product type.
C
Credit Check
A credit check is used to assess a customer’s credit history and previous financial behaviour when applying for finance (such as consumer credit). It helps lenders evaluate risk and decide whether to approve an application and on what terms.
Creditworthiness
Creditworthiness refers to how likely a customer is to repay borrowed money based on their financial history, credit score, income, and existing commitments. Lenders use this assessment to determine a shopper’s eligibility for credit.
Cart Abandonment
Cart abandonment is when a customer adds items to an online shopping cart but leaves the site without completing the purchase. It’s often linked to unexpected costs, limited payment options, or a checkout process that feels too long or complicated.
D
Decline Recovery
Decline recovery refers to capturing a sale after a customer is declined by a primary lender at checkout. This involves offering an alternative finance option, either within the checkout process or via email/sms to give the sale another chance.
E
Eligibility Check
An eligibility check indicates whether a customer is likely to be approved for finance before completing a full application, often using limited data.
E-Commerce
The buying and selling of goods or services online. In retail finance, e-commerce refers to how payment and finance options are integrated into a retailer’s website or online checkout to allow customers to apply for and use finance digitally.
F
Finance at Checkout
Finance at checkout (Retail finance, BNPL, Point of Sale finance) allows customers to apply for and select a payment plan directly during the online or in-store purchasing process. For merchants, this can help increase conversion rates on higher-value purchases.
Flexible Payments
Payment options that allow customers to spread the cost of a purchase over time, rather than paying the full amount upfront. This may include installments or different repayment lengths depending on the finance agreement.
Finance Provider
A finance provider is the authorised lender that supplies the credit to the customer. The finance provider is responsible for assessing affordability, approving the application, setting the terms of the agreement, and managing repayments.
FCA
The Financial Conduct Authority (FCA) is the UK regulator for financial services. The FCA sets the rules for how regulated finance is offered and marketed, and works to protect consumers by ensuring firms act fairly and responsibly.
First-Line Finance (prime lender)
A type of retail finance that is introduced at the point of sale, where the customer applies for finance directly with an authorised lender as part of the checkout or sales process. The retailer acts as an introducer, not the lender, and the credit agreement is between the customer and the finance provider.
Financial Inclusion
The principle of ensuring people have fair access to appropriate financial products and services. In the context of retail finance, this means offering payment options that are transparent, affordable, and suited to different financial circumstances, without excluding customers or encouraging unaffordable borrowing.
G
H
Hard Credit Search
A hard credit search is a full credit check recorded on a customer’s credit file. Multiple hard searches in a short period may impact creditworthiness.
I
Interest-Free Finance
Interest-free finance allows customers to spread the cost of a purchase over a fixed period without paying interest, provided payments are made on time. Merchants often subsidise the cost of offering interest-free options.
Interest-Bearing Finance
Interest-bearing finance relates to a type of credit where the customer repays more than the original purchase price because interest is charged on the amount borrowed. The total cost is spread over agreed repayments, with the interest rate and full cost clearly set out in the credit agreement.
In-store Integration
The way a finance option is built into a retailer’s physical point-of-sale experience. This includes how finance is presented to customers in-store, how applications are processed by staff or POS systems, and how the finance provider’s technology connects with the retailer’s sales process to enable smooth, compliant checkout.
J
K
L
Lender
A lender is the regulated financial provider that supplies the funds for a finance agreement and management repayments of the agreed term.
Loan Value
Loan value refers to the amount of money borrowed under a finance agreement. This is typically the price of the goods or services being financed, excluding interest and any additional charges that may apply over the life of the loan.
M
Merchant Portal
A merchant portal is an online dashboard that allows businesses to manage finance applications, track performance, and access reporting tools.
N
Non-Prime Customer
A non-prime customer has a limited or impaired credit history and may not qualify for traditional prime finance products. Alternative or second-line finance options may be used to support this group, subject to affordability and eligibility checks.
O
Open Banking
Open Banking allows customers to securely share financial data with lenders to support affordability checks and faster decision-making.
P
Point of Sale Finance
Point of sale finance enables customers to apply for and agree to a payment plan at the time of purchase rather than paying the full amount upfront.
Q
R
Retail Finance
Retail finance enables customers to spread the cost of goods or services over time instead of paying the full amount upfront. It is commonly used for higher-value purchases and is offered at the point of sale, either online or in-store.
Repayment Terms
Repayment terms relate to the agreed schedule for paying back borrowed money. This includes how much is paid, how often payments are made, how long the agreement lasts, and any interest or fees that apply.
Retailer
A business that sells goods or services directly to customers. When offering finance as an Introducer Appointed Representative, the retailer introduces the finance option but does not provide the loan or make credit decisions.
Regulated Finance
A form of consumer credit that is covered by financial regulation. It involves a formal credit agreement between the customer and an authorised lender, with required checks on affordability and clear rules on how the finance is advertised, managed, and repaid.
Responsible Lending
Responsible lending refers to the practice of offering credit in a way that is fair and appropriate for the customer. This means checking affordability, explaining terms clearly, and ensuring the customer is not encouraged to take on borrowing they are unlikely to be able to repay.
S
Second-Line Finance
Second-line finance is offered to customers who are declined by a primary lender. It allows merchants to capture additional sales by providing an alternative finance option rather than losing the transaction entirely.
Soft Credit Search
A soft credit search checks a customer’s credit profile without leaving a visible mark on their credit file. It is often used to show eligibility or the likelihood of approval before a full application is made.
T
Term Length
Term length refers to the amount of time a customer has to repay a finance agreement. Short terms typically mean higher monthly payments, while longer terms reduce monthly costs by may increase total repayment if interest is added.
U
Underwriting
Underwriting is the process lenders use to assess risk and decide whether to approve a finance application and on what terms.
V
Verification Checks
Verification checks confirm a customer’s identity, income, or financial details to support responsible lending and fraud prevention.
W
Withdrawal Period
The withdrawal period is the timeframe during which a customer can cancel a finance agreement after it has been agreed, in line with regulatory requirements.
X
Y
Z
Zero Deposit Option
A zero deposit option allows a customer to enter a finance agreement without paying an upfront deposit. The full purchase amount is spread across repayments, subject to affordability and eligibility checks.