How to integrate embedded lending into your business

Dejan Bešić Categories: Business Insights Date 25-Dec-2023 4 minutes to read
How To Integrate Embedded Lending Into Your Business News

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    Embedded lending is a type of embedded financial service that enables users to access more favorable loan options at the point of sale.

    Before embedded lending, consumers had to rely on their credit cards or traditional loans, often with high interest rates. With embedded lending, consumers have greater access to lending options, which in turn helps businesses increase their sales.

    Consider the following scenario: An e-commerce platform offering fashion and lifestyle products wants to revolutionize its customer experience. Recognizing the potential to drive sales and enhance customer loyalty, the company decided to integrate embedded financial services and, specifically, embedded lending services into its platform.

    Within a short time, they experienced a substantial increase in average order values, sales, and customer loyalty. The flexible payment options empowered customers to manage their budgets effectively, providing a seamless and personalized shopping experience.

    The embedded lending market is expected to reach $32.5 billion by 2032, growing at a CAGR (compound annual growth rate) of 19.4% from 2022 to 2032. With increasing demand, technological advancements, and evolving consumer preferences — can your business afford to miss out on this opportunity?

    How To Integrate Embedded Lending Into Your Business News Details

    What is embedded lending?

    Embedded lending transforms consumer lending with seamless integration of loans into non-financial products and services.

    Embedded lending eliminates the need for consumers to apply for loans through traditional banking channels or separate third-party applications. Using APIs, non-financial companies act as intermediaries between lending institutions and consumers.

    This integration allows consumers to complete the entire loan lifecycle — application, verification, approval, credit, and repayment — within a digital platform, eliminating friction and delays.

    The result is a simplified and secure lending experience, where users can access financing with just a few clicks, revolutionizing the landscape of consumer lending.

    Embedded lending: Buy Now, Pay Later (BNPL)

    BNPL is one of the most recognizable forms of embedded lending; it lets customers make purchases and pay for them later — all on the same page and within a few seconds.

    Today, popular companies like Klarna, Affirm, and Afterpay offer Buy Now, Pay Later solutions.

    During the online checkout process, when consumers contemplate their available funds, they can split the payment up over time. These BNPL offerings generally provide monthly or weekly payment installments over a predetermined period with no interest.

    5 Benefits of embedded lending for business

    Embedded lending allows companies of any size to offer customers more payment options easily and comes with some great benefits, like:

    1. Efficiency and reduced paperwork: Embedded loan offerings eliminate the need for extensive paperwork, streamlining the application and approval process for borrowers.
    2. Real-time financial decisions: Embedded lending allows for real-time financial decisions, providing borrowers with quick responses and enhancing their overall experience.
    3. Built-in compliance and security: Integrating compliance and security measures within embedded lending platforms ensures a secure and trustworthy financial transaction environment.
    4. Revenue growth and cost efficiency: Embedded lending can increase revenue streams by enabling real-time payments while decreasing the overall cost of transactions for lenders and borrowers.
    5. Enhanced customer loyalty: The seamless and user-friendly nature of embedded lending fosters customer loyalty by providing a convenient and positive financial experience, encouraging repeat engagement.
    How To Integrate Embedded Lending Into Your Business News Details2

    5 Benefits of embedded lending for consumers

    Embedded lending benefits consumers by providing a seamless and convenient financial experience, reducing paperwork, enabling quick decisions, and offering diverse lending options that cater to individual needs.

    1. Access to various appealing loan options: Embedded lending provides consumers with a range of loan choices, allowing them to select the option that best suits their financial needs and preferences.
    2. Timely access to needed loans: Consumers can access the loans they need precisely when needed, addressing urgent financial requirements seamlessly.
    3. Never need to leave the platform: With embedded lending seamlessly integrated into the purchasing experience, consumers can secure loans without leaving the platform where they make their product or service selections, ensuring a seamless and uninterrupted buying journey.
    4. Convenience: Embedded lending offers unparalleled convenience, allowing consumers to apply for and manage loans effortlessly, anytime and anywhere, without the constraints of traditional banking hours or physical locations.
    5. User-friendly technology: Consumers benefit from intuitive and user-friendly technology in embedded lending platforms, making the entire borrowing process accessible and straightforward, even for individuals with limited financial or technological expertise.
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    How to integrate embedded lending into your business

    Implementing embedded finance solutions like embedded lending involves strategic partnerships, technological integration, compliance adherence, and ongoing optimization to create a seamless and valuable financial experience for businesses and consumers.

    • Identify strategic partners: Research and identify reputable fintech companies, banks, or financial institutions to form strategic partnerships for embedded finance services.

    Find infrastructure providers to build APIs that connect the user experience to the financial service provider and support aspects like credit scoping, security, connectivity, and insights.

    • Evaluate the regulatory landscape: Conduct a thorough analysis of financial regulations and compliance requirements applicable to your business and the regions in which you operate.
    • Assess technology solutions: Explore solutions that align with your business model and seamlessly integrate embedded finance with APIs and other relevant tools.

    Vega IT: Your trusted partner for embedded lending

    Embedded finance services like embedded lending require partnerships and collaborations between parties like banks, retailers, and API/platform providers.

    It is critical, therefore, to identify partners with the right technologies and capabilities for successful embedded finance solutions.

    Vega IT's extensive expertise and experience position us as the embedded finance partner you need. With embedded financial projects spanning Europe, the UAE, and the USA, our long-standing client relationships affirm our deep industry knowledge.

    We can help you:

    • Navigate and address regulatory considerations, security, and data risks
    • Integrate embedded lending solutions seamlessly with APIs

    To benefit from our expertise, book a call, and talk with one of our experts to see how partnering with Vega IT is the key to successful embedded finance solutions like embedded lending.

    Or learn more by downloading our ebook: Growth reimagined: Capitalizing on the embedded finance revolution.

    Dejan Besic Author
    Dejan Bešić Partner & Software Engineer

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