Online Retailers Preapprove Credit for Customers as They Shop

  • Philip Ryan
  • November 17, 2016
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© Can Stock Photo / ajtIt may not be easier to identify sound credit risks today, but retailers certainly have more opportunities — and customers are taking advantage of that.

A TransUnion report released Tuesday indicates that December typically sees a doubling in the amount of private-label cards opened by consumers, and this number has climbed incrementally each of the past few years. This should come as no surprise, nor should the inevitable news that follows the expansion of credit — an increase in debt and defaults.

“The number of consumers with retail card credit jumped from 123.7 million in December 2014 to 124.8 million in December 2015,” a TransUnion press release indicated. “As of Q3 2016, the number of consumers with retail cards grew to 125.3 million and will likely grow substantially during this year’s holiday season.”

Consumer card balances also increased. TransUnion projects an average balance on store cards of $1,768 this December, up from $1,725 a year ago, and $1,648 in 2014. Defaults are likewise on the rise, projected to hit 1.4%, up from 1.3% in 2015, and 1.21% in 2014.

Online, the phenomenon is similar to in-store, with one important change. “Online retailers can preapprove you while you’re shopping,” said Nidhi Verma, senior direct of financial services industry insights and research at TransUnion. “This is great for issuers.”

The virtual gift card market is said to be $160 billion and growing rapidly, but TransUnion doesn’t track it specifically. Another option, common elsewhere in the world but still new (or new again — ask your grandmother) in the U.S., is splitting payments into installments using one’s existing credit card. SplitIt is a leader in this area. Point-of-sale financing is available from Affirm and FinanceIt.

There is no shortage of ways to get credit this holiday season — the question, as always, is getting the right credit to the right customer at the right time.

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Philip Ryan is Senior Editor of Bank Innovation and Senior Director of INV Fintech. He began covering financial services in 2012 and has more than 15 years' experience in online journalism. He can be reached at

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