Senior Man With Credit Card
Europe Lending

Failed Credit Applications Serve a Death Blow to Online Retailers’ Customer Relations

A failed online credit application has a big impact on drop-off rates for online retailers, but the potential damage is more long-term.

These are the key findings of a YouGov study, released by the ethical finance provider etika on the eve of its UK launch, which highlights the lasting damage short-term loans have on consumer well being and retailers’ customer relations.

The data shows how 60 per cent of customers rejected for credit by an online retailer would be upset by the experience and change their attitude towards that retailer. Such sentiments were more concentrated when people had previously been rejected for credit; said 64 per cent of respondents. Over 6 in 10 would also be likely to consider a competitor, whilst 23 per cent would never go back to that first retailer.

Likewise, credit rejection would cause 54 per cent to feel ‘upset’ or ‘very upset’, with eight per cent citing this as a cause of mental health decline. That figure rose to 16 per cent among people who had previously been rejected for credit.

62 per cent said that they were ‘likely’ or ‘very likely’ to consider a competitive retailer for a similarly priced item if they were rejected for credit by the original retailer’s finance provider. whilst 70 per cent said they were ‘likely’ or ‘very likely’ to consider a competitor for a similar purchase.

Dr Heather Kappes
Dr Heather Kappes

Dr Heather Kappes, Associate Professorial Lecturer in the Department of Management at the London School of Economics and Political Science, who studies consumer behaviour and marketing in this way, said: “Because people view brands as relationship partners, companies can’t afford to drive customers into competitors’ arms. However, in an age of easy credit, there can be tension between making customers happy and being responsible. There is clear value for retailers in partnering with a financing company that helps them walk this fine line. These partnerships can contribute to customer-retailer relationships that become long-term commitments rather than flings.”

Other highlights from the research include:

  • The two biggest barriers to applying for zero per cent interest credit (purchases of £500+) were the assumption of hidden fees (15 per cent) and concerns around the effect on credit scores (12 per cent).
  • But of respondents who had been previously rejected for finance, 21 per cent noted fear of the impact on their credit score as the main barrier, and 21 per cent cited fear of being rejected.
Robert Schuijff, CEO at etika
Robert Schuijff

Robert Schuijff, CEO at etika added: “Retailers want to help potential customers get the products they want, with finance they can manage. But too often the finance application process is binary – accept or decline. The hard credit search leaves a mark on that applicant’s credit history but what’s worse, this YouGov research shows that a decline can have huge impact on that customer’s willingness to engage with the retailer for that particular sale – or ever again.

“By contrast, when retailers tell customers what their credit budget is following a soft credit check, it saves a large number of customers from a hard credit decline. The improved customer journey reduces drop-off, which increases sales conversion, and the reduction in hard credit checks means less damage to customers’ credit histories.

“In fact, helping customers to build a positive credit history boosts their financial health – 92 per cent of etika customers sampled had an improved credit score after utilising etika’s finance that fits! Furthermore, we don’t have late fees or any hidden costs or conditions, all of which is central to our ethical approach.”


  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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