Sofas and season tickets: Inside the world of retail finance
Retailing financing is on the up and as big banks steer away from the market, specialist lenders are cashing in.
Fresh research from the finance and leasing association (FLA) showed consumer finance grew by 13 per cent in March 2025, compared to the year prior.
The first quarter of 2025 saw a six per cent increase against the same period in 2024 with a record £12bn in new lending reported in March alone.
Secure Trust’s retail finance arm, V12, has staked its claim in the growing market, lending to consumers through 1400 different retailers across the UK.
Whether it’s a new sofa from Sofology, a new piece of jewellery from Watches of Switzerland or even a Premier League season ticket – V12 is behind the finance packages of major big ticket purchases.
Andrew Phillips, managing director at V12, told City AM: “These are aspirational purchases for customers… It’s people wanting to better their lives.”
The firm averages a purchase value of around £1500, which Phillips said is skewed by significant lending in furniture.
The bank is partnered with small independents through to the likes of jeweller Beaverbrooks, furniture store DFS and season tickets at Manchester United, Arsenal and Chelsea.
Seizing the opportunity left by big banks
Britain’s top lenders have snubbed the retail finance landscape, which has opened up a vacuum for firms like Secure Trust.
Phillips said the area was “relatively small” with around £10bn of lending per year, compared to other areas the big four banks – HSBC, Barclays, Natwest and Lloyds – typically focus on.
David McCreadie, chief executive of Secure Trust, told City AM: “The large banks have got so much focus on their business as usual, regulatory change and trying to digitise processes where they can so as a result, they’re just not really fleet of foot.”
He added their historical use of legacy technology that was incompatible with the market helped “open up an opportunity.”
The firm notched another record in 2024 for new lending. Balances increased 11 per cent to £3.6bn as its retail finance arm’s market share of new business jumped to 15.3 per cent from 13.5 per cent.
McCreadie said the bank has secured the number three spot in the market after topping £1.35bn in loans to customers in 2024.
Risky business?
The unsecured practice comes with the weighty risk of consumers unable to pay the package they subscribed to.
The government has implemented significant reforms to regulate Buy Now, Pay Later (BNPL) services in its bid to protect consumers from accumulating unmanageable debt.
From 2026, BNPL providers will be required to assess consumers’ ability to repay before offering credit and to offer transparent and accessible information about loan terms, enabling consumers to make informed decisions
This comes as the Financial Conduct Authority (FCA) brings providers under its oversight and holds them to relevant sections of the Consumer Credit Act.
Secure Trust’s cost of risk – which measures the effort a bank makes to protect itself against potential losses in its portfolio – increased to 1.8 per cent in 2024 from 1.2 per cent.
But it was its vehicle finance business that led the rise after a turbulent period for motor finance. The arm’s cost of risk increased to 7.7 per cent from 3.4 per cent in 2023.
Meanwhile, retail finance reduced its cost of risk to one per cent, down from 1.4 per cent.
McCreadie said Secure Trust had been able to leverage modern tech when deciding whether to lend to a consumer in a credit search.
Around 90 per cent of decisions were settled within six seconds, the bank’s chief said.
“We take the authority to do a full credit search, so obviously we’re looking at their past record of credit repayments, an assessment based on their income, their ability to afford the repayments of this new facility.”
When a fintech meets a bank…
As young fintechs entered the banking scene, they were labelled as disruptors to the traditional mechanics of lending.
But, Secure Trust’s acquisition of V12 tells the success story of co-operation between tradition and modern banking rather than competition.
Secure Trust purchased V12 in 2012 for an initial cost of £3.5m.
Phillips said: “There’s always been a lot of talk about fintechs and banks and competing with one another, and the banks struggle to deal with fleetness of foot of fintechs, but the fintech struggle with those sort of cost of funds and the hygiene factors that banks bring to the table.
“That’s a really big differentiator for us – we’re a fintech owned by a bank, we can address both sides of that equation.”
The fintech boss said the amount of business written in an entire year prior to the acquisition is now what it writes in “about a fortnight” following the takeover.
A pivot to people
Looking to the future, Phillips noted there were “still plenty more” ways for the firm to serve the existing markets.
He cited ambitions to enter the home improvement sector, which hosts “very similar aspirational drivers to the other retail sectors that we currently operate with.”
“I think there’s also a really good opportunity for us to build a closer relationship with the end consumer as well,” Phillips said.
V12 boasts 1.2 million live customers, with retailers serving as a bridge between the fintech and its consumer base.
Phillips targeted further communication with consumers to get a “better feel for what they are looking for” as a central focus for the future.
“While the retailer is a really important part of the equation for us, so too is the end consumer,” he said.
As the bank continues its expansion into the home improvement sector, another emerging area Phillips noted was partnerships with cosmetic dentistry.
Consumers could soon be flashing brighter smiles thanks to teeth-whitening packages financed by the bank-fintech hybrid – one six-second loan decision at a time.