Mike Ashley’s Frasers Group is finalising plans to lend customers as much as £2,000 and let shoppers buy products on credit in a major push into financial services.
Mr Ashley’s retail group is preparing to launch a suite of financial offerings under a new “Frasers Plus” brand, spearheaded by chief executive Michael Murray.
A senior City source said: “Ashley’s really excited about credit. He reckons Frasers’ bottom line could be boosted.”
Frasers Plus will offer two main products: a buy-now-pay-later facility that will let customers pay for purchases over time, with Frasers Group covering the cost up front; and the ability to take a loan through the app that could be spent across the group’s retailers.
Customers will also be able to combine multiple buy-now-pay-later purchases into a single loan through Studio Retail, formerly known as Findel, the Financial Conduct Authority (FCA)-regulated business that Frasers acquired out of bankruptcy a year ago.
Technology developed by Tymit, a fintech startup in which Frasers has a 20pc stake, will be used for online payments.
It is believed that Frasers Plus could offer loans of as much as £2,000, which could be pooled for purchases across all of the group’s brands such as Sports Direct, Flannels, Evans Cycles and House of Fraser. Final details have yet to be agreed with regulators, however, according to industry sources.
Frasers Plus’s buy-now-pay-later deals are expected to be promoted at every till across the group’s 769 UK stores and on the group's websites.
Frasers Plus will also include loyalty points and allow the company to consolidate customers’ data. It is hoped that the success of Tesco’s Clubcard loyalty programme can be replicated by awarding customers who register their details with points on purchases.
Mr Murray is understood to believe that Frasers Plus’s standing as a regulated entity, through Findel, will set it apart from rival buy-now-pay-later providers such as Sweden’s Klarna.
The decision to offer financing in-house is a departure from rivals such as JD Sports, which relies on buy-now-pay-later payments provided by outside companies such as Klarna.
Bringing financing options “on balance sheet” will allow the company to boost sales while still retaining funds that would otherwise need to be paid to third parties in fees.
Frasers is hoping the initiative will enjoy similar profitability to other major retailers that offer purchase on credit. Next generates around £150m of pre-tax profit annually from its credit offering, Next Finance, for example.
It comes as regulators and the Government prepare to crackdown on shopping loans, which are growing in popularity as inflation squeezes people’s finances. Buy-now-pay-later currently sits outside of regulation but the FCA has called for it to be urgently regulated.
The Treasury has promised a crackdown on shopping loans, however as debt charities warn consumers are being encouraged to overspend.
Mr Murray is understood to believe that being regulated by the FCA should help soothe concerns that customers could be persuaded to buy unaffordable items.
“To be regulated is an enormous process,” said a source familiar with his thinking. “You need a track record of prioritising customers and treating them fairly.”
Klarna sparked a fresh round of criticism for the industry at the end of last year by announcing a partnership with Deliveroo, allowing customers to spread the cost of their takeaway over the following weeks.
Founder Sebastian Siemiatkowski has warned against a crackdown on the buy-now-pay-later sector because it makes it harder to compete with traditional lenders.
“We need more competition in the banking industry, we need good consumer protection laws but that don’t stifle competition,” he told Bloomberg in November.
The Frasers Plus initiative comes with a dwindling number of credit options for the millions of Britons that are unable to access a credit card.
Provident Financial, a doorstep lender that at its peak was valued at around £6bn, last week ditched its 140-year-old name as it concentrates on credit cards through new name Vanquis Banking Group. Others, such as Amigo Loans, have flirted with bankruptcy in recent years as regulators cracked down on subprime retail lending.
Frasers Group declined to comment. A spokesman for Klarna said: "Klarna is a fully licensed European bank, supervised by the FCA and our Financing product is regulated under the Consumer Credit Act. We always put consumers first, and have been calling for further regulation of short-term, interest-free BNPL products for over two years."
Mr Ashley formally stepped down from the day-to-day running of Frasers last year, handing over to his son-in-law Mr Murray. The billionaire retains a 69pc controlling stake in the company.