The embedded lending market has boomed in the past two years. Customers have discovered the convenience of functions like buy now pay later (BNPL), and the ability to provide credit at the point of purchase is now a powerful differentiator for many retailers. How can banks take advantage?
Embedded lending sits within the wider embedded finance ecosystem. It enables non-financial institutions to provide lending services to end users without relying on high-cost third parties. Businesses can offer loan products directly at the point of sale or during a transaction.
This means taxi companies can create credit cards for their drivers, or retailers can offer customers payment plans at the point of sale without applications, long onboarding processes, or stacks of forms to fill in.
Embedded lending allows a business to maintain control of its brand and interaction with the customer rather than hand them off to a bank to finalise the process. It is fast becoming popular with retailers. More than 50% of European business leaders want to launch embedded finance schemes, and 67% of UK adults want financial options provided seamlessly.
Paying later
BNPL is the most common form of embedded lending. It has surged in popularity over the past few years on the back of fintech offering convenience at the checkout.
Around 60% of consumers have used a BNPL service, while BNPL spending is projected to hit more than $500 billion globally by 2027. Customers demand options at the checkout, and financial services firms are in a critical position to take advantage.
The BNPL market is dominated by a selection of fintechs, with PayPal Credit seeing the most significant use by consumers. Yet few banks have stepped up to the plate to provide the same service. Many are held back by their legacy technology, unable to move with the agility required to match greenfield fintechs.
From low to high
Traditional lending strategies revolve around low-volume, high-value products: mortgages, auto, and business loans. Newer forms of credit are becoming increasingly low-value and high-volume: the average BNPL user repays US$150 a month.
The traditional lending process is bogged down in complex, rigid, and time-consuming underwriting processes, all run by old banking systems. This combines into an unattractive service for retailers and clients looking for agile lending options.
Financial institutions have become used to selecting from a series of “Lending-in-a-Box” solutions, which must be inserted into their existing infrastructure. This can be time-consuming and labour-intensive.
Enter: Pismo
The Pismo platform focuses on providing effective digital-first loans to revolutionise how funds are disbursed. Pismo is born on the cloud, and we offer a headless lending solution powered by a set of APIs capable of managing the entire lifecycle.
We partner with leading providers in the market. They all match our vision for agile financial services covering origination, e-KYC, and credit scoring. Have existing infrastructure that needs to remain untouched? No problem; our APIs allow us to connect the dots. At the same time, the Pismo system sits at the heart of the lending ecosystem, doing what it does best – managing the lifecycle, ensuring repayments, or issuing penalties.
We know implementations dragging for months or years without a single loan being issued hits the bottom line. Pismo enables banks to hit the ground running and see results quickly.
These benefits extend to customers, providing a powerful engine for a bank to build a fully digital lending process and then provide it to retailers as a packaged embedded lending product.
Are you ready to become an embedded lending pioneer? Get in touch with us today to take the next step.
