Dixons Carphone plans to DOUBLE its ‘buy now pay later’ business which could take credit revenues up to £1bn

  • The firm expects to make £440 million from credit revenues this year 
  • The business now accounts for about 8 per cent of its products 
  • The ramp-up of Dixons Carphone’s offer comes as the FCA scrutinises the market amid concerns that some consumers are being drawn into debt 

Dixons Carphone has hatched a plan to double the amount of products sold on credit.

The owner of the Dixons PC World and Carphone Warehouse brands expects to make £440 million from credit revenues this year and the business now accounts for about 8 per cent of its products.

But the company, which is run by former Shop Direct chief executive Alex Baldock, believes that could increase to 16 per cent of products or more. That could take credit revenues to nearly £1 billion.

Dixons Carphone has hatched a plan to double the amount of products sold on credit

Dixons Carphone has hatched a plan to double the amount of products sold on credit

Currys PC World currently charges 24.9 per cent APR to customers who buy products on credit. Under its repayment terms, a £360 television would cost £405 over a 12-month repayment period, according to its website.

Analysts said customers may begin to notice the increased ‘prominence’ given to the company’s repayment plans – called ‘Your Plan’ – when they are shopping in stores.

In a research note, Citi analysts said: ‘Importantly, the in-store customer activation system Your Plan will be given more prominence. This will aim to drive higher transaction values and add-ons for customers at the point of check-out.’ 

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The ramp-up of Dixons Carphone’s consumer credit offer comes as the Financial Conduct Authority scrutinises the market amid concerns that some consumers are being drawn into debt.

In a swoop last week, the FCA introduced new rules that will take effect in November for ‘buy now, pay later’ shoppers.

The rules are designed to prevent shoppers being charged backdated interest if they fail to pay back the full amount in the allotted time –typically 12 months.

Firms will be banned from charging interest on money people have already repaid under the terms of their contracts. The changes are expected to save consumers up to £60 million a year and mean they can pay off debts more comfortably, the FCA said.

Baldock’s background at Shop Direct is thought to have played a role in Dixons Carphone’s strategy, as the online group he used to run relies heavily on credit as part of its service.

Dixons Carphone recently signed an agreement with French banking group BNP Paribas to offer credit to shoppers, which it said provided ‘better economics and better breadth of offer, still without taking on credit or fraud risk’.

It said consumer credit was a ‘big profitable growth opportunity and the largest and fastest-growing segment of services, with strong demand in both electricals and mobile’.

It added: ‘Technology is expensive, particularly at the big-ticket end of the market where we are strongest; our credit makes it affordable, as well as giving customers reason to shop with us.’

Baldock, who it has been estimated could earn £15 million under a five-year pay plan, was drafted in early last year to revive the business. He has recently sealed a landmark agreement with mobile network operators over contracts it had described as ‘unsustainable’.

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Next week, he is expected to update the company’s strategy after launching his turnaround plan in November. It made a £440 million loss in the first half of its financial year after it cut the value of its unprofitable mobile business.

Baldock has handed 30,000 staff £1,000 of shares each in the hope that a stake in the business will lead to improved service. 

 





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