Embedded Lending Explained

Embedded lending is experiencing fast uptake throughout the UK. More and more retailers are offering a loan option to their customers, with large numbers embedding a ‘buy now, pay later’ (BNPL) option at checkout. This works well for buying something like trainers or clothing, but what about larger items like electric scooters or home improvements? The next wave, focusing on finance options for larger items, sees personal loans embedded into brands and buying journeys…Paul explains all.

What is embedded lending?

Put simply, 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.

Using a customisable API (Application Programming Interface) or a white label solution, any digital brand can integrate embedded lending options into their business. All aspects can be tailored to meet their specific customers’ needs, and the integrity of the brand identity remains intact. The entire lending process becomes faster, simpler, and seamless, allowing the applicant to focus on the use of funds, rather than the process of arranging funds.

What does it mean for customers?

Embedding lending into brands and buying journeys enables a seamless experience for the customer, be it a retail customer or a business customer. It is almost invisible – just an extra few clicks to arrange the finance. It provides access to finance options at the right time, making finance simple and accessible.

Customers no longer need to leave their buying journey to engage with lenders to apply for a loan, they can do it at a time that makes sense to them.

As an example, a business might need quick access to funds to buy additional stock. Often orders cannot wait until loan approval is achieved through the traditional route. If their supplier has embedded lending into the offering it ensures neither party loses the order – convenient access to funding at the moment of need.

What does embedded lending mean for brands?

Embedded lending provides a competitive advantage for brands. For example, with retail brands it is important retailers stay abreast of the market, know what is available to enhance their offering, and continuously try to improve their customer experience. Customers have many brands they can choose to purchase the same product or service from; having a stronger offering increases the chance of closing the sale and builds loyalty.

What does embedded lending mean for lenders?

There has been a change in consumer behaviour over the past decade or so with the emergence of mobile devices. This has impacted the consumer’s buying and transaction channels. Online shopping and digital experiences continue to become more popular. Traditionally lenders are generally not part of these digital businesses, requiring customers to leave their purchase in a virtual basket to go off and arrange finance. Embedded lending opens this channel to lenders, ensuring that they are ‘inserted’ into the moment the customer identifies a funding need, the moment that ultimately matters for the lender.