Is a European Consumer Credit Model Coming to the US via Ecommerce?

By February 2, 2016August 17th, 2016Blog

Selling credit or selling televisions?

If you are a retail customer in most European countries, it is likely that you are quite familiar with this sight.


If you are from the United States or the United Kingdom, chances are this is somewhat unrecognizable. There are fundamental differences in the way retail consumer credit is built and distributed across the US, UK and European markets:

  • USA/UK > revolving credit through credit card (financial institution or merchants)
  • Rest of Europe > installment credit in store or through payment card (financial institution or merchants), often linked to a specific purchase. The interest cost is either carried by the customer or the merchant.


From that perspective, one can say that companies like San Francisco-based Affirm, New York-based Bread and the geographic extension of Klarna are quite interesting. Effectively, they are introducing the notion of installment credit at checkout in the U.S., a very European product dominated in its traditional form by companies often linked to banks such as BNP Paribas Personal Finance, Santander Consumer Finance, Credit Agricole Consumer Finance. The difference in this case is that the new players are starting from e-commerce and mobile e-commerce checkout.

The daily life of an ecommerce site

 If there is one thing that ecommerce websites hate, it is the Cart Abandonment Rate. In short, this is where as a vendor gets everything right minus the purchase: from acquisition and product mix to site/app experience. But when the time comes for the shopper to make the purchase, they fail to complete transaction out of their shopping cart. Making the checkout experience seamless is a constant concern for vendors on one hand, but on the other hand, making any sudden changes can prove to be a very risky move. This will be a challenge for the emerging players who have to prove offering credit brings more users than it deters in the checkout process.

Are we at the beginning of a move beyond credit as we know it? Looking broadly at the impact of Fintech on the American credit landscape, there are a number of interesting things to look out for. A new crop of credit checkout players are entering the fore, and marketplace lenders such as Payoff* and Lendingclub, are joining in to participate in Credit Transformation. They are both moving consumers from Revolving Credit to Fixed Term Credit Millenials’ attitude toward credit cards, is also moving the needle. Personally, I can’t wait to see what consumer finance will look like in the coming years.

Originally posted on Tekfin.