In the next blog of our ‘Embedded Lending Explained’ series, we look at the many terms used to describe embedded lending. Embedded lending is a new term, so what are people actually talking about? We thought it would be fun to explore the many words and phrases used. What’s in a name? Svetlana explains all.
Firstly, what is ‘embedded lending’?
As explained by our Co-founder Paul in a previous blog in the series, ‘embedded lending is where the financial service of lending is offered through non-financial products or services. By embedding- or inserting- lending into a non-financial brand or customer buying journey, customers get finance at the point of need from any non-financial brand they trust’.
So simply it means…non-financial companies offering loans directly to their customer. Got it.
What are some of the terms used to describe embedded lending?
Ok, so now we understand what embedded lending is, lets look at some of the terms used and understand what’s what.
Embedded finance – No surprises here, embedded finance is the parent of embedded lending- it’s the category as a whole. Embedded finance means embedding any financial service into a non-financial brand or customer buying journey. Lending is one of these services, others include insurance and payments.
White label lending – Because embedded lending is part of the brands product offering- i.e. no longer associated or branded as the financial institution- it makes sense that the term ‘white label’ would be used to describe the ‘branded’ part. White label has been around for years and is used widely in financial services – including for credit cards and insurance, but also covers dozens of non-financial services like mobile phone packages and a host of manufactured goods that are sold under different brands- even cornflakes.
POS (point-of-service) lending – this is an interesting one as it is very descriptive – lending at the point of service/ lending when you need access to funds. This term is not as common, but we like it! At Peeled, we’d refer to this time as the ‘moment the matters’.
Lending-as-a-service – ‘As a service’ permeates almost every business model. It was initially used in the software business as the ‘build and sell’ of software, then moved to a ‘build and pay as you use’ model. ‘As a service’, in the context of lending, enables a brand to offer lending without the investment, time and complexity needed to build it. Lending-as-a service- just plug it in!
Loan API– If you want to build your own application you can use a loan API to connect with lenders. This is an infrastructure play that you can build your embedded loan proposition around. Although not the full offering, it is the foundation of embedded lending and understandable why it is used.
Pay with a loan – We’ve seen this term more recently. It’s one we like! (and use internally). What we like about it is the recognition that a loan is ultimately just another form of payment. Sounds good to us! #paywithaloan
No matter what you call it, embedded lending is here to stay.
Interested in reading more about embedded lending? Check out our previous blog in the Embedded Lending Explained series on how embedded lending is reshaping customer experience. Steve our COO explains all.
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