Table of Contents
- Quick Answer: What Is the Cost of Finance Declines at Checkout?
- What Do “Finance Declines at Checkout” Mean?
- How to Calculate What Finance Declines Are Costing You (In Lost Sales)
- The Hidden Costs of a Declined Finance Application
- Why Finance Declines Happen
- What Is Second-Line Finance?
- How Second-Line Finance Reduces the Cost of Checkout Declines
- What to Look for in a Second-Line Finance Partner
- FAQ: Finance Declines at Checkout
- Final Takeaway
Quick Answer: What Is the Cost of Finance Declines at Checkout?
The cost of finance declines at checkout is the amount of customer demand that you are failing to convert because your finance company has rejected applications at the point of purchase.
This will be a considerable amount of lost sales for many retailers every month, especially for larger transactions where finance is the chosen payment method.
The independently commissioned research by Payl8r found that 72% of customers will abandon their cart if they are rejected for finance, meaning that the majority of finance rejections will result in a lost sale rather than a delayed transaction.
What Do “Finance Declines at Checkout” Mean?
Finance declines at checkout are when a customer chooses to pay for their goods via a split payment option (such as retail finance or BNPL) but are then rejected by the finance company.
At this stage in the customer journey, the customer has already:
- Chosen their product
- Reached the checkout
- Expressed a clear intent to buy
- Attempted to checkout
For many, finance is not just a convenience but the facilitator of the sale, meaning that removing this option at the final stage of the sale cold result in a high level of abandonment.
How to Calculate What Finance Declines Are Costing You (In Lost Sales)
You only need three pieces of information to see just how much customer demand you are currently losing due to finance declines:
- Total number of finance applications (per month)
- Your current finance provider’s acceptance rate
- Your average order value (AOV)
Step 1: Work out how many customers are being declined
Formula: Declined applications = Total finance applications x (1 – Acceptance rate)
Example:
If you have 1,000 finance applications per month and your provider accepts 65%:
1,000 x (1-0.65) = 350 finance applications per month that are declined.
Step 2: Estimate the value of sales being blocked at the checkout
Formula: Estimate lost sales = Declined applications x AOV
Example:
If your AOV is £900:
350 x £900 = £315,000 of potential sales per month that cannot checkout with finance.
So how much of this demand is truly lost?
Payl8r’s independently commissioned research found that 72% of shoppers say they would abandon their cart if declined for finance. That means the majority of this blocked demand does not simply switch to another payment method, it leaves the funnel entirely.
The Hidden Costs of a Declined Finance Application
Finance declines don’t just block individual transactions, they create a ripple effect across your whole growth funnel.
Wasted Acquisition and Trading Spend
By the time a customer reaches checkout, you may already have invested in:
- Paid media/ads
- Affiliates and partnerships
- Promotions and discounting
When a finance decline leads to abandonment, all of that spend fails to convert into a sale.
Lost Sales at Higher Basket Values
Finance is disproportionately used for higher-value purchases. That means declines don’t just lose ‘any’ sale – they often lose your most commercially valuable orders, dragging down average order value and revenue per shopper.
Knock-On Effects Across Performance Metrics
Finance declines can also lead to:
- Lower conversion rates at checkout
- Inaccurate data on marketing performance
- Lower return on advertising spend
- Lower lifetime value if customers do not return after a negative checkout experience
Why Finance Declines Happen
Why do customers get declined for finance?
Finance declines are never about a lack of intent. Often, customers are genuinely interested in purchasing, but they don’t fit the risk parameters of prime lenders, whose decision engines are built to maximise low repayment risk rather than credit access and maximum approval rates.
Common reasons include:
- Thin or poor credit history
- Subprime or near-prime credit profiles
- Self-employed or irregular income earners
- Younger customers with poor credit history
- Automated underwriting algorithms built to optimise for risk rather than inclusion
Prime lenders are an essential part of the market, but with their more stringent acceptance criteria, a substantial number of perfectly valid, high-intent customers are filtered out at checkout.
From a retailer’s point of view, this creates a systemic issue: high-intent customers reach the checkout, only to be rejected, not because they don’t want to buy, but because they don’t fit the prime lender’s credit profile.
What is Second-Line Finance?
Second-line retail finance is a secondary finance option offered only to customers who have been declined by the first-line provider.
Rather than the process ending at ‘finance application unsuccessful’, eligible customers are offered a second finance option with different criteria – still FCA-compliant, but built to cater to a wider customer base.
This enables retailers to:
- Maintain their primary finance partner
- Enhance overall approval rate coverage
- Recover sales that would otherwise be abandoned
How Second-Line Finance Reduces the Cost of Checkout Declines
Recover Lost Sales Without Replacing Your Primary Provider
Second-line retail finance is intended to work alongside your existing finance infrastructure, not against it. Customers who are approved by your primary provider proceed through your checkout as they do today, without any additional complexity or hurdles.
It’s only when a customer is declined that the second-line option comes into play, offering a clear alternative route to complete their purchase. This turns what would otherwise be a hard stop at checkout into a second chance to convert, helping you recover sales that are currently falling out of the funnel, without needing to replace or renegotiate your prime finance partnership.
Capture High-Intent Customers With Different Credit Profiles
A finance decline does not necessarily indicate a lack of customer intent or ability to pay. In the vast majority of instances, these customers have actively selected a product, proceeded to checkout, and attempted to pay. The intent to purchase is already present.
They may simply not meet the narrow underwriting criteria of prime finance partners because of factors such as limited credit history, self-employed income, or being earlier in their credit lifecycle. Second-line finance provides these customers with a responsible alternative route to purchase, enabling retailers to serve more customers without compromising on either compliance or customer experience.
Improve Overall Checkout Conversion
By reducing abandonment at the finance decline point, second-line finance can help improve performance across a range of key checkout and commercial metrics, including:
- Overall finance approval rates
- Checkout completion
- Revenue per shopper
- Return on customer acquisition spend
Rather than simply optimising for customers who are already being approved, this solution addresses one of the largest sources of lost revenue at checkout, ensuring more high-intent transactions are completed.
What to Look for in a Second-Line Finance Partner
When considering second-line finance solutions, consider the following:
- FCA-regulated and responsible lending
- Clear and compliant customer communication
- Smooth checkout integration
- Low customer friction for first-line approved customers
- Transparent reporting of recovered conversions
FAQ: Finance Declines at Checkout
What causes finance declines at checkout?
Finance declines are a result of lender underwriting algorithms evaluating creditworthiness and affordability, not a lack of customer intent. Some customers are simply not eligible for finance at that moment, while others are declined because they do not meet the prime lender profile (e.g., insufficient credit history or non-standard income patterns).
How many customers abandon after a finance decline?
According to independently commissioned research by Payl8r, 72% of customers claim they would abandon their cart if declined for finance.
Can retailers recover sales lost to finance declines?
Yes. Offering a second-line finance choice provides declined consumers with an alternative way to buy. Data from Payl8r reveals that between 20–25% of consumers who are declined by a first-line lender can be approved through a second line, enabling retailers to recover a significant proportion of lost sales.
Does second-line finance affect compliance?
No. When offered via an FCA-regulated partner, second-line finance is delivered within responsible lending parameters.
Final Takeaway
Finance declines at checkout are one of the biggest hidden causes of lost sales for retailers who offer split payment solutions.
By recognising the number of consumers being declined, the value of the baskets they represent, and the frequency with which declines cause abandonment, retailers can identify a problem that exists in the shadows—and take action to recover lost sales.
To talk about your current checkout performance and how second-line finance solutions might help, please contact us at [email protected]