How to Launch and Grow a Peer-to-Peer Lending Business – 6 Critical Components
P2P lending isn’t a trend. It’s an entirely new delivery vehicle that’s here to stay. Borrowers have already pushed peer-to-peer loan volume close to the $1 trillion mark, but launching an infrastructure that supports investor/borrower matching can still be a complex undertaking. Alternative and digital lenders who understand online origination and payments processing are the ones to be well positioned to succeed.
How retailers can provide customer financing and boost ROI
When a retailer decides to offer financing to its customers, it has a binary choice about implementation. It can either: Find a third party to provide the service, for which the business will pay a per-transaction fee (and possibly an additional monthly fee), or Find a software solution that allows the business to keep fees and sets terms in exchange on a subscription basis Here, we’ll provide an overview of these choices, including the pros and cons of providing point-of-sale, or POS, financing options to customers in any format. [download] But first, let’s acknowledge the elephants in the room: credit cards and evolving consumer preferences around sources of unsecured lending. Credit cards are losing ground to POS financing Through most of the past half century, credit-card companies have driven consumer financing — and become trillion-dollar businesses in the process. But these vehicles are losing market share to point-of-sale financing, especially among younger consumers. For example, between the end of 2015 and the end of 2018, general-purpose credit cards increased by 7% in terms of compound annual growth rate, according to credit-bureau data compiled by McKinsey. In the same period, however, POS lending saw a CAGR of 24% in the same period. And the trend has continued through the pandemic, with credit cards posting a CAGR of 6% in the three years through 2021 versus a 20% jump for POS alternatives — with lots of room left to grow. [related-solutions] “Banks and other issuers still dominate retail lending through credit cards, but their lead is shrinking fast,” says Elena Ionenko, co-founder and chief operating officer of TurnKey Lender, a pace-setter in the SaaS-financing industry. “With a number of providers showing consumers and businesses that installment lending is more cost-effective and empowering than credit-card financing ever could be, the tide is definitely turning.” With credit cards losing ground, more retailers are conducting due diligence on POS financing — also called “embedded” or “buy now, pay later” financing — as a way to help consumers bridge gaps between their needs on one hand, and, on the other hand, their immediately available resources. To paint a sharper picture for these inquirers, let’s jump into the pluses and minuses of POS financing. On the pro side: More Sales BNPL options help customers overcome reluctance, especially around large- and medium-ticket items. A direct result of this is more sales backed by incremental payments Deeper relationships If embedded lending helps overcome a buyer’s reluctance to make a purchase in the first place, then it must also bring in new customers. Further, POS financing has been shown to build customer loyalty, which leads in turn to more valuable lifetime relationships Immediate payment This one is conditional. If a business goes the third-party route, it will indeed take immediate payment for the product or service in question, with the third party shouldering all of the actual financing. If the organization takes a service-as-a-software approach, POS payments will come in installments — and we’ll show the advantages of this approach shortly On the con side: Bad debts Credit checks don’t catch everything, and you can wind up having to chase debtors. If you use a third party, they reserve the right to cancel your account if too many of your customers fall into this bracket, a circumstance that may be seen as beyond your control Cash-flow concerns This is a two-sided coin. If you go with a third-party provider, this isn’t a worry: as we’ve noted, the merchant takes immediate payment in full. If you adopt an in-house Saas approach where you’re the actual financier, payment for financed products and services comes in according to the agreed-on schedule. On the other hand, these increments can help blunt the effects of seasonality, spreading more income out over the year. Most third-party financing-platform providers charge businesses between 2% and 6% on every BNPL transaction, with an additional charge of between 20 cents and 30 cents per financed transaction. Above and beyond these fees, some financing providers charge another $40 to $50 a month for a stated number of transactions. They usually also charge your customers interest with little or no split with your business. Despite these charges, some retailers embrace outsourcing the whole POS-financing piece to a competent and market-tested financier. Primarily, they like a third-party system they don’t have to think about. SaaS means more say, more revenue, and more value Thing is, maybe retailers should be a bit more hands-on with their lending programs, and a bit more willing to engage. That’s not to satisfy idle curiosity, but to reap three notable benefits from an SaaS-based approach to customer financing. Those are: Control When you use a turnkey platform, you set all the parameters. With a third-party provider, your customers have to follow another company’s rules. The third party conducts its due diligence, sets its terms and fees, and, in most cases, keeps all the analytical insight it derives from your customers for itself or the highest bidder. With TurnKey Lender, for example, the control retailers enjoy extends to the platform itself, which is modular, and designed for retailers to use (and pay for) only the components they want or need. Fees Using a turnkey SaaS platform, a retailer like you not only keeps the interest payments, you set them. As a result, you can offer no-fee grace periods, or waive fees altogether for promotions and other incentives, including favored-customer privileges. Analytics Like fees, the ability to derive business insights from financing data is an offshoot of the greater control an SaaS lending platform confers. Guided by artificial intelligence, TurnKey Lender’s platform enables retailers to sort through reams of raw data to render intelligence on: Customer behavior Operations optimization Customer loyalty Marketing ROI At TurnKey Lender, the reach of AI goes even further, according to Ionenko. “Our AI means retailers get a boost in credit-risk evaluation and fraud detection, a must-have for overall portfolio health,” she says. “It provides a crucial first step in credit-risk evaluation and fraud detection,
Merchant Cash Advances: Helping The eCommerce Industry Grow in 2024
Commercial interruptions linked to the coronavirus pandemic and its variant-borne waves have prompted many small to mid-size enterprises (SMEs) to seek merchant cash advance software, either to see them through lockdowns or to help them expand e-commerce operations and allow commerce to continue even when storefronts are shuttered. An MCA, effectively a form of “business factoring” is a lump-sum that’s exchanged for a set percentage of the borrower’s sales receipts, with daily payments made over periods, typically, of less than two years. Often structured as a sale of future revenue cleared and settled via credit and debit cards, MCAs aren’t technically loans, but investments. Further, with advances in financing technology, businesses can now offer, process, and manage MCAs as a B2B offering with bank-grade credit-decision accuracy and end-to-end MCA automation that doesn’t need the participation of bank-card processors or hinge on card receipts at all. Before we proceed, would you (or your team) like this case study on Merchant Cash Advance automation to provide SMEs and gig-workers access to specialized finance. Other “not a loan” characteristics of MCAs are: Further, MCAs aren’t governed by interest rates, but by “factor” rates. So, if an MCA provider advances $10,000 to a business at a factor rate of 1.2, the business must pay the MCA provider $12,000. If the factor rate of 1.3 in the same scenario, the MCA provider is entitled to $13,000 from the business, and so on. Critics of MCAs maintain that factor rates can be extremely high, even for unsecured funding. Others say the case legal disputes over MCAs can lead to nasty entanglements, with the case law not quite settled. The main attraction of MCAs to businesses, even where repayment rates are higher than for some traditional loans, lies in their flexible approval requirements, faster turnaround, and shorter terms, says Dmitry Voronenko, co-founder and CEO of TurnKey Lender, a lending loan-management technology provider with operations in more than 50 countries. “It’s a way to get out in front of the competition,” he adds. “For small businesses looking to gain a competitive edge through expansion or digital transformation, especially where traditional loans are unavailable or take too long to secure, MCAs can be the answer,” he adds. In the UK, requests by online businesses for MCAs rose 47% in 2021 over 2020, according to one vendor — with the average advance up by 35% in the same period. Globally, the MCA market — spurred by improvements in financial technology and SME demand for short-term cash infusions — is expected to hit $1.4 trillion by 2028 for a compound annual growth rate of 15.5% through the previous 10 years. A robust platform built specifically for the needs of MCA providers and the businesses they serve The Merchant Cash Advance version of TurnKey Lender’s financing-software suite is engineered with the underlying MCA business model in mind, with all flexibility, intelligence, and scalability of its loan-management offerings, along with MCA-specific characteristics including: “We equip MCA providers with a cash-advance solution that makes a difference to online enterprises and other businesses where it really matters,” says Voronenko. “That means reaching fast and accurate financing decisions using award-winning artificial intelligence, so our clients can sidestep cumbersome paperwork, avoid human error by putting collections on autopilot — in an environment, by the way, that features all MCA-management tasks on one platform Drilling down on TurnKey Lender’s MCA solution, the fintech offers cloud-based functionality that includes: Cash-flow problems can hit SMEs with particular force, says TurnKey Lender’s Voronenko, pointing to a US Bank study that shows 82% of small-business failures come down to their being cash-strapped, often temporarily. “That said, MCAs aren’t for all businesses in all scenarios,” adds Voronenko. “But for high-volume businesses with lots of card transactions, an MCA can be a good way to cover short-term gaps in funding — and a scalable MCA technology suite like ours is a great way for MCA providers to manage their businesses and keep their customers happy.”
How Embedded Lending Tech Is Changing Everything so Fast
Banking as a service, or BaaS, is an end-to-end technology model that positions banks and non-banks to deliver customized banking and payment services, and, the evidence suggests, makes their customers happier to do business with them. In the realm of lending, BaaS empowers organizations with any pre-existing financial infrastructure to provide digital “buy now, pay later,” or BNPL, options to consumers and businesses eager to spread payments out over time. For consumers, incentives on this front include the desire to manage monthly budgets against a backdrop of rising prices and economic uncertainty, and avoiding credit cards and their often high interest rates. For businesses, it’s a convenient way to combat the ill effects of seasonality or to make purchases of the capital equipment, stock or trade goods needed to keep revenue flowing smoothly. But these lending innovations depend on BaaS being an easily transferable service with digital lending capabilities that can be embedded in organizations of all kinds. And the market seems to be getting the message. The market value of BaaS, valued at around $2.5 billion in 2020, is expected to break the $12 billion mark before 2031, according to Future Market Insights. In addition to this head0-turning valuation, Cornerstone Advisors says BaaS unlocks a knock-on “revenue opportunity” of $25 billion. The Forces Propelling Our Embrace Of Embedded Lending For smaller banks and non-banks — including a range of decidedly non-financial players eager to provide online and physical purchase-point BNPL services — embedded lending offers a fast track to faster growth. Embedded lending software has to be robust enough to process loans at all stages from approval to settlement, and flexible enough to initiate lending anywhere there’s an internet connection, from e-commerce portals and in-store registers to car lots and doctors’ offices. Chiefly, the underlying technology is “embedded” in the sense that it works with the software most companies already use to coordinate and track their operations. For some companies, “embedded lending is a complete game-changer,” says Dmitry Voronenko, CEO and co-founder of TurnKey Lender, pioneering in the lending software space. “We know first-hand of companies that have seen sales hikes of 30% and more, improved customer loyalty, and more repeat business — all directly attributable to being able to provide financing on the spot.” While the coronavirus pandemic has fueled digital transformation, the rise of embedded finance and BNPL technology is linked to five main factors. [download] The advent of artificial intelligence Ink and paper forms are passe. Credit-bureau scores, while useful, don’t tell enough of the loan applicant’s story. But artificial intelligence unlocks a new world of insight. By incorporating behavioral markers derived from permission-based inputs such as spending habits and bill-pay habits, AI makes lending operations at once more inclusive and less risky. [related-solutions] The need for continual growth Banks are heading into a period of decline, with McKinsey expecting them to grow 14% less annually between 2020 and 2025. Considering the revenue opportunities of providing lending automation and other BaaS offerings, getting in on embedded lending looks more like a necessity than a luxury going forward. Digitalization Converting business processes to digital formats instead of paper and manual-input spreadsheets allows companies to extend financial services to clients more efficiently than ever before, making them a low-cost value-add to customers. The modularity of digital processes also allows for more customization and additional chances to keep expenses in line. Higher trust Consumers trust fintechs as much or more than they trust banks, with 42% of US household financial-decision makers claiming to use at least one non-bank fintech app, according to McKinsey. Disruption We don’t even have to leave the A’s to find major corporations — think Alibaba, Amazon, and Apple — that are bound and determined to wrench market share from financial-service incumbents. What’s their overarching master plan? To use SaaS to seize market share from old-line banks by providing financial services to mass-market consumers, starting with the lending piece. And it would be amazing if they stop there. Meanwhile, TurnKey Lender’s embedded lending is garnering praise — based on direct experience — from business leaders around the world. With help from TurnKey Lender, “we’re becoming a digital lender, which is what we need to do to survive,” says Steven Cornell, president of National Iron Bank in Salisbury, Conn. “It completely automates everything.” For Patrick McFall of Money Managers Inc. in the Bahamas, the choice of TurnKey Lender’s embedded lending technology “was pretty much a no brainer. The product is sold, and the price is right.” As an SaaS provider, TurnKey Lender has been a good fit for Thrive Refugee Enterprise in Parramatta, Australia, which turned to the lending-tech provider about two years ago to improve its reporting capabilities. “We have been pleased with the outcome,” says Gus Nehme, the non-profit’s business development director. “We’ve been able to capture and record information, which allows us to keep on top of delinquencies, which is of course extremely important to us.” Jon Lam of Calgary, Canada-based Windmill Microlending describes TurnKey Lender’s loan-management platform as “compact and cost-effective,and their development team as “good to work with and very responsive.” “Nothing that has precipitated the new wave of banking software solutions in the last 10 years has gone away,” says TurnKey Lender’s Voronenko. “In fact, some of these factors — AI comes first to mind — are still in their earliest phases of development, which is compelling organizations around the world, banks and non-banks alike, to take action on this front before it is too late.”
Healthcare Trends for 2022 Include Intuitive “Buy Now, Pay Later” Financing for Patients
When it comes to healthcare trends in 2022, Covid-19 will continue to cast a long shadow, just as it did in 2020 and 2021. But the sheer duration of this pandemic means it’s no longer feasible for consumers to ignore other, more personal healthcare priorities. Whether they like it or not, in other words, patients have to get back out there, and healthcare providers who can help them get the care they need at price points they can manage will stand out from the competition. The pandemic has made automation more attractive than ever With healthcare consumers and providers under financial pressure from the pandemic, medical, dental, and other healthcare practices are exploring ways to make payments easier for patients as we continue slogging through an acute public-health crisis now entering its third year. [download] To help healthcare providers establish priorities for making their services more readily available to patients whose finances have been stretched thin, and whose outlooks have been clouded by uncertainty, we’ll describe the financial landscape physicians, dentists, and other practitioners confront in 2022. Compressed margins 35% of hospitals had negative margins in the second half of 2021. The omicron surge will have done nothing to blunt this trend in the first half of 2022. Mixed spending picture Spending was higher early in 2021 over the same period in 2020, but this improvement fell short of GDP growth. Widening insurance gaps About 10% of US adults under age 30 lack health insurance. And personal spending among the healthcare-insured is expected to rise nearly 10% a year through 2026. And among Americans over 65, more than a quarter couldn’t scrape together $500 for medical bills, and a third of patients — insured or not — run into problems with healthcare billing or debt-management. Further, almost 20% of patients have unpaid healthcare-expense debt, with these individuals owing, on average, $429. “This picture calls for action by healthcare professionals,” says Dmitry Voronenko, CEO and co-founder of TurnKey Lender. “Across the board, they’re under pressure to be more efficient, more attuned to budget and cash flow analysis, and more sensitive to their patients’ financial constraints.” Telehealthcare and automated payment processing are here to stay Marc Pickren, head of TurnKey Lender’s business in the Americas, agrees. “Healthcare providers have to start offering financing options, and they need to do it on a platform that makes fast and accurate credit decisions, enhances provider-patient relationships, and provides insightful data analysis,” he says. While digital transformation may not be the first thought for many doctors and dentists, many of them have been using a gateway technology from the earliest days of the pandemic: telemedicine. According to the Centers for Disease Control, telehealth visits increased by 50% just in the first quarter of 2020. Just in one week in the spring of 2020 telehealth visits increased by 154% over the same period just one year before. “The distance between providing online consultations to taking a ‘buy now, pay later’ approach to healthcare payments using an intuitive, user-friendly platform is extremely short,” says Voronenko. “Like telehealth’s relationship to the pandemic, BNPL for healthcare is a story of a set of technologies being there, ready and waiting to meet the needs of businesses and consumers confronting new realities.” [related-solutions] Technology has advanced, making BNPL offerings from fintechs like TurnKey Lender essentially “plug and play.” Healthcare providers can set their own lending criteria based on actual client behavior and real-world market conditions — criteria that can be customized to match prevailing economic realities in different geographic regions. Understanding the difference artificial intelligence can make For TurnKey Lender, the linchpin of next-level functionality is its artificial intelligence. With credit scoring and underwriting two of the biggest challenges for lenders, TurnKey Lender’s AI-driven solutions benefit lenders and loan applicants alike by taking the guesswork out of credit decisioning. TurnKey Lender’s self-learning algorithms empower healthcare practices to make faster, more accurate, and more profitable credit decisions, avoiding human error, lengthy loan-approval processes, and substandard fraud protection. The lending-automation provider’s advanced self-learning algorithms enable lenders to analyze large sets of consumer data and make more informed risk evaluations and credit-scoring decisions than ever before. Using TurnKey Lender, financing applications can be analyzed not just on the basis of traditional criteria such as biographical questionnaires and credit-bureau scores, but on behavioral-finance inputs such as spending habits and track records for meeting general financial obligations. As a result, healthcare practitioners can make headway with underserved demographics through fast and accurate lending and loan management. Besides its utility in credit decisioning and underwriting, lending-oriented AI also contributes to the healthcare practice’s advanced psychometrics profiling, takes care of compliance concerns and regulatory updates, and provides greater cybersecurity. Finally, a lending system’s AI powers deep and powerful analytics that can help your firm understand its patient base and discover new ways to serve them better. BNPL is an absolute game-changer for the healthcare industry With your patient financing on autopilot, you can look forward to spending more time on patients, and less time worrying about payments. Among other benefits healthcare practices working with TurnKey Lender technology are: Increase average medical billing per patient by up to 120% An average 17% increase in billings Up to 93% of patients return to your practice because of your flexible payment options Better relationships with patients by not outsourcing BNPL to third-party providers Avoiding “income seasonality” by distributing payments throughout the year Competitive advantages from instantly evaluating and approving patient financing “We’re inviting healthcare entrepreneurs to imagine a world where patients can make flexible payments spread out over time instead of having to pay, on the spot, for out-of-pocket expenses, co-payments, and deductibles,” says X. “These game-changing advantages are a result of using reliable, user-friendly technology instead of outsourcing the financing piece to a bank or other third party.” In-house financing also keeps your patients’ information in-house, including financing decisions and sensitive health data is specifically tailored to the needs of healthcare practices. “When it comes to financing technology, medical and
The Challenges of Running an Online Lending Business
Five Key Business Models Available for POS Financing
Valued at $90.69 billion in 2020, the pay later market is projected to reach $3.98 trillion by 2030. And of course that was before the coronavirus pandemic shredded short- and medium-term financial forecasts for businesses and households alike. We’ve also collected the five key reasons to consider POS financing for retailers in a recent blog post. “If anything, retailers and other product and service providers are keener now than they were pre-Covid to attract customers and encourage sales by providing quick, low-risk installment loans to fund purchases — and not just on big-ticket items,” says Elena Ionenko, co-founder and business-development head of loan-servicing software maker TurnKey Lender. “That said, businesses considering adding POS-purchasing options should take a strategic approach, one that presupposes some familiarity with the different business models that can support such lending.” [download] All the reasons why Besides the spur of shutdowns this year, the recent rise in POS financing is attributable to several principal factors, according to Ionenko. Public awareness: As mentioned, consumers and retailers are gaining awareness of the financing possibilities of POS, especially for goods with large and mid-level price tags. Convenience: Loan applications are processed prior to actual sales, either at the checkout using a mobile device, or as a quick preliminary step in making online purchases. Fintech innovation: Publishers of POS-financing software have streamlined origination and other processes by means of artificial intelligence, dynamic evaluation models, and automated oversight and management features. Credit-Card fatigue: Young consumers (many struggling to repay student loans) tend to be more suspicious and hostile toward credit cards than their elders. But, adds Ionenko, just as would-be lenders should understand the catalysts for the rise of POS financing, they should be conversant with the five main business models that underpin retail and other business approaches to this form of lending. Those are: Balance-sheet rental. In this model, the POS financier partners with an established lender — usually a bank or a fintech — to originate loans. This is often the cheapest option, but it provides limited access to customers through the life of the loan, making it less user friendly in the most fundamental sense. Joining an “ecosystem.” In this version, the POS sponsor — whether its a retailer, a car lot, or a medical practice — taps into an online marketplace featuring multiple firms with experience in POS lending, This version tends to yield more control over approval criteria, higher approval rates, and less “integration fatigue” — again though, post-approval touchpoints with customers may be limited. Credit-card program innovation. Remember the credit-card fatigue we mentioned earlier? Another wrinkle on outsourcing to support POS financing depends on working with a card issuer to carve out lower-interest installment loans for existing card accounts as a way to attract more installment buyers. Going all-in. This one is far-fetched for most businesses that aren’t already, say, banks. The idea is to become a fintech in one’s own right — an undertaking that calls for considerable technological — and probably tech-marketing — know-how. Renting the technology. Businesses can subscribe to pre-existing POS-lending platforms, sparing themselves the toil and expense of investing in proprietary lending infrastructure. The rub here is finding the right technology partner. The case for renting For Ionenko, renting the tech — that is, going for an in-house POS solution enabled by a specialist lending-platform provider makes the most sense. Among the advantages she cites: Better data integrity and security. Client data is kept between your business and its customers with no third-party involvement. This enhances confidentiality — a boon to many businesses, including medical practices. This also diminishes the risk of customers getting poached by competitors introduced to them by third-party lenders. Higher conversion rates. For customers, an in-house solution backed by a dedicated lending-tech maker can make the process of applying for and securing a POS loan nearly as fast and easy as making a payment at a cash register — an innovation that reduces purchase abandonment. Proprietary underwriting. If a business wants to set its own criteria for credit decisions, and wants to provide more flexibility around approvals, in-house rules can help ensure that its interest rates are calibrated to balance policies and risk aversion with profitability and enhanced customer relations. Access to transactional data to increase fast and smart decisions through artificial intelligence, and to optimize portfolio yield with technology that helps retailers the business identify profitable customers for more favorable terms or other relationship-building incentives. Reducing (or eliminating) transaction fees otherwise payable to a third-party lender (which can be as high as 15%).Secure, encrypted apps ensure safe functionality at any location there’s wifi or mobile-data availability. Improved brand loyalty. With fully-supported white-label technology, a business doesn’t have to worry about its customers getting confused by third-party documentation — or losing such a vital touch point to make inroads in long-term relationship building. “Retailers remain under acute pressure from the coronavirus pandemic and measures taken to prevent its spread against a darkening economic backdrop,” says TurnKey Lender’s Ionenko. “Giving customers a choice to fund purchases over time through POS installment financing can reduce ticket shock, build loyalty and help close sales.” TurnKey Lender solution for retailers TurnKey Lender’s Retail Solution allows anyone to provide instant financing to customers to quickly grow new business. With an intuitive user interface and a proprietary AI-powered Decision Engine, you get the lowest possible credit risks with the biggest potential growth spread. The cloud-based platform incorporates retailers’ order processing automation, flexible business logic, and customer portal in a single, integrated solution. The entire financing process is 100% automated. Customers apply from your website or an in-store kiosk. The Platform automatically pulls customer data from credit bureaus, bank statements, and other sources, and suggests a credit decision based on your unique business rules. The system either automatically decisions the financing or presents it to your underwriter for review. Funds are sent to the vendor once the transaction is complete and the financing is executed. The Customer Portal allows customers to easily manage
Covid’s 2022 Staying Power Underlines Franchisees Need for In-House Financing
For business owners everywhere, Covid-19 isn’t the only thing going on in early 2022, but — with the new surge of an especially contagious variant — it remains one of the biggest things. Two years in, the public-health crisis is still taking lives, straining hospitals, and weighing on an already uncertain economy. During this crisis, franchisors are in a strong position to bolster the entities they rely on for distribution and street-level marketing. By offering franchise finance to their franchisees, they become financial-solution hubs, to the benefit of the Main Street entrepreneurs they count on to thrive as well as themselves. But striking out in this direction calls for prudent due diligence to find lending-platform providers with the requisite understanding of franchising and its unique characteristics. In late December 2021, Moody’s Analytics lowered its Q1 2022 US gross domestic product forecast from 5.2% to 2.2%, mainly because of fulfillment delays and component shortages linked to the delta and omicron varieties of the coronavirus. Still, the US Chamber of Commerce extols one business segment for particular praise: franchises. “Success stories during Covid-19 have not been limited to clever small businesses or large corporations, with many franchise-style businesses also figuring out how to keep customers coming back for more,” the association writes. One business publication claims franchises are “the businesses driving America’s economic recovery” from the coronavirus pandemic. A time-tested business model gets a new lease on life with cutting-edge financing technology Franchising goes back to medieval Europe, when proto-entrepreneurs would, for a price, secure Crown or Church licenses to hunt game, operate ferries, and collect taxes. But the concept didn’t really gel until American innovators saw its potential as a distribution engine in the middle of the 1800s. By now, spurred by the success of franchising pioneers like Singer Sewing Machine and Coca-Cola, the list of US franchising giants reads like a Who’s Who of consumer businesses, including: 7-Eleven Ace Hardware McDonald’s (and most other fast-food brands you can name) Re/Max Rexall And while fast-service restaurants are the most visible examples of franchising, they only represent a quarter of franchises operating today, with the remainder spread across smaller, and often local, sectors such as fitness instruction, childcare, and home-improvement services. In fact, past fast-food establishments, convenience stores, and real-estate agencies the most “franchised” industries are: Beauty salons Fitness centers Full-service restaurants Hotels and motels Janitorial services Real estate agencies Snack and “soft” beverage sellers Generally, franchises succeed more often than independent startups. After two years, 70% of independent startups are still in business, according to the US Small Business Administration and the Census Bureau. After five years, however, the survival rate for independent startups drops to 50%. By the 10-year mark, only 30% of businesses are still operating. In contrast, 95% of franchises were still in business after five years, and 91% after seven years, according to the International Franchise Association. Franchisees can benefit from in-house workarounds for seasonality and daunting equipment costs Even before Covid, some franchisors had decades of experience with “seasonality,” where some businesses — for instance, ski resorts — make their money in one (roughly predictable) busy period in the year. The tax-preparation industry falls squarely into this category as well, typically reporting a loss in Q3, the quarter right after tax season. And while tax-prep giant H&R Block is accustomed to earnings coming in at once, and long accustomed to helping its franchises bridge financing gaps in slow periods — it reached out to one lending-technology provider for help in automating and digitizing its financing program for franchise operators. With the pandemic as a spur, “H&R Block came to us for help implementing lending strategies designed to help it increase satisfaction among its franchisees and develop a funding strategy for franchise expansion,” says Elena Ionenko, co-founder and operations chief for TurnKey Lender, which provides financing technology and support in more than 50 markets worldwide. Other franchisors may be less concerned about seasonality than equipping franchisees to handle start-up and periodic capital-equipment costs. “In choosing our Unified Lending Management platform to help the company meet its franchisees’ cash-flow needs, H&R Block gets a seamless, white-label solution that’s fast, accurate, easy to use and features flexible reporting and analytics for sharing information,” says Ionenko. “Big Picture, H&R Block’s engagement with us reflects Gartner’s view that the surest way tto soften the impact of Covid-19 and ensure operational continuity is by accelerating digital initiatives.” Among franchisors that conform to this mold is Ace Hardware, which “provides internal-inventory financing to help existing franchisees open new stores without having to go back to the bank for financing,” according to Entrepreneur magazine. Meanwhile, pizza-chain startup Marco’s Pizza provides financing to franchisees with a credit facility underwritten by a private-equity fund. Franchisors unearth new efficiencies while reaching out to help Covid-slowed affiliates Ionenko expects in-house franchise financing to become an operational staple for franchisors that are eager to see their licensed affiliates thrive. “We hear from franchisors constantly,” she says. “They know their franchisees face a lot of uncertainty these days, and that having robust in-house financing sends a calming message to them: ‘We are in your corner, and we will back your play.’” But we’re not talking about something that costs more than it earns. “It’s true that franchisees rest easier knowing that HQ has an ongoing and vested interest in their success,” says TurnKey Lender’s Ionenko. “But a franchisor can make money lending to franchisees — while tapping into valuable financing analytics that new shed light on efficiencies and bolster marketing initiatives.” TurnKey Lender was already a leader in embedded-financing technology before Covid-19 struck in early 2020. Seven years ago, the company initiated a new kind of lending through its Unified Lending Management platform, which equips companies of all sizes to provide fast, secure financing to their customers and affiliates using technology that’s bolstered by sophisticated machine learning, but as easy to use and reliable as the ATM in your bank’s lobby. TurnKey Lender’s solution includes core functionalities such as digital-loan origination, alternative-credit scoring, AI-based underwriting, loan servicing, debt collection, reporting, compliance, and more. “Since we started in 2014, we’ve been providing software-as-a-service that automates all digital lending operations, and all
Smart, Efficient In-House Financing Is an All-Weather Solution for OEMs, No Matter What the Economy Does
Original equipment manufacturers, or OEMs, saw investment increase a relatively mild 1.5% in the third quarter of 2021, according to the Equipment Leasing and Financing Association. While that’s a plucky outcome after four consecutive quarters of double-digit growth, the EFLA views the pace set in Q3 2021 as a herald of peaking or slowing growth through Q1 2022. Beyond this initial pause, however, the ELFA sees 2022 as “an above-average year” for capital-equipment providers, with pent-up consumer demand edging out the uncertainty of another winter wave of Covid-19 amid the emergence of new variants, an ongoing labor shortage, weak supply chains, and the specter of notably higher inflation rates. One leading technology executive isn’t too sure pent-up demand will be enough to ensure net growth next year. “With the coronavirus lockdowns back in focus in many markets around the world, it’s a challenging landscape for OEMs, which are rightfully described at the backbone of the US economy,” says Elena Ionenko, co-founder and operations chief of TurnKey Lender, a cloud-based lending-technology provider that caters to equipment makers and distributors around the globe. Ionenko adds: “Whether we’re looking at feast, famine, or something in-between, OEMs need to increase efficiency, dexterity, and capacity in their financing operations if they want to participate in a post-Covid economy characterized by heightened demand and higher expectations from consumers and businesses alike.” [download] [related-solutions] ‘Intel Inside’ doesn’t tell the full story of how OEM dealers interrelate There’s ambiguity around the term “OEM.” The most widely accepted definition, according to Wikipedia, is “a company that produces components and equipment that may be marketed by another manufacturer.” Want another way to understand the concept? Think of parts. Carmakers, for example, buy some parts from other manufacturers to go in their vehicles. It can be cheaper for carmakers to source from other manufacturers than to set up manufacturing facilities for every little part, especially when many of these out-of-view widgets are common to different makes of automobile. In turn, this commoditization allows car-parts makers to be more efficient and competitive. This arrangement can improve for a parts maker if the end-product producer (in our example, a car maker) endorses the part maker’s components, making them recommended replacement parts. These endorsed parts then compete with “aftermarket” parts. Meanwhile, some consumers won’t use aftermarket parts for their cars, others wouldn’t use anything else, and some decide case by case. Although it’s tempting to use the “Intel Inside” slogan to explain how parts suppliers (Intel) and end-product manufacturers (laptop maker Dell, let’s say) work together, roles can get blurred in practice. Some chip companies also sell consumer-ready devices under their own brands, and some computer makers also make semiconductors — though not necessarily all the chips they might need for a finished product. In this way, a company like Dell — which makes some of the chips it uses in its buyer-ready wares, buys others from third-party suppliers, and sells other chips to other end-product manufacturers — can be on any side of a given OEM equation, depending on the circumstances. Equipment-financing capabilities have a direct application for almost 80% of companies The OEM space is vast with nearly four-fifths of US businesses leasing or financing the equipment they need to function and thrive. Top OEM sectors include: Vessels and containers Trucks and transportation equipment Rail cars and rolling stock Mining machinery Medical technology and equipment Materials handling Manufacturing and industrial machinery IT equipment and software Construction and off-road equipment Business, retail, and office equipment Aircraft and unmanned aerial vehicles (drones) Agricultural equipment “Each of these industries has special requirements for financing, and our modular and configurable SaaS financing platform is meeting these diverse needs,” says Ionenko. “Our offering is easy to use, compatible with different system softwares, and our technology is continuously updated so our clients never have to play catch-up with their competitors on the tech front.” OEM financing that’s powered by artificial intelligence and machine learning For consultancy Deloitte, the big difference between traditional and the enhanced technology for in-house lending comes down to artificial intelligence and machine learning, which “help companies efficiently discover patterns, reveal anomalies, make predictions and decisions, and generate insights — and are increasingly becoming key drivers of organizational performance.” TurnKey Lender’s Ionenko agrees. “AI is a fulcrum for advances in in-house equipment-financing technology,” according to the executive. “Along with machine learning, AI empowers companies involved with equipment finance and equipment leasing to draw sound conclusions from a large and varied array of inputs, putting it at the heart of advanced lending capabilities.” As a result, OEMs can improve their equipment financing with an in-house, white-label, user-friendly, and custom-configurable lending platform that provides full automation of your processes and instant credit decisioning. Saving money and boosting efficiencies through smart lending: an OEM exec’s testimonial OEMs that use TurnKey Lender for their equipment financing can count on: Streamlined and automated legacy processes Less human error and fewer operational inefficiencies Increased sales and repeated business Bank-grade credit scoring that meets your company’s terms and specifications Ability to create credit products, promotions, and risk-based pricing for your loans or leases And, on average, outcomes for OEMs that use TurnKey Lender include: 58% increase to the average order value 44% increase in sales conversion 20% increase in purchase frequency within 30 days Plus the OEM keeps the transaction fees (and any additional interest, fees, and penalties) that third-party providers usually claim for themselves. For John Lam, head of finance and risk at Windmill Microlending, “TurnKey Lender has changed how our team works.” The OEM executive adds that TurnKey Lender is “user-friendly, cost-effective, works in the cloud, and it ‘plugs into’ other pieces of software that you are currently using or wish to use.” As a result, says Lam, Windmill Microlending has “reduced its cost-per-loan by 55%.”
Why Veterinarians Need In-House Pet-Care Financing
Every day, as a veterinary professional, you encounter pet owners who can’t afford the treatment you’ve recommended, or can’t pay immediately. If you take medical credit cards, customers may be wary of the punishing charges that kick in after 0%-interest “promotional periods,” or assume they won’t be approved. The same can be said about third-party financiers that run massive lending programs from afar, set whatever terms they want, and keep most if not all of the financing revenue derived from your patients. And you understand that the owner’s ability to pay can determine the well-being of the animal in your care — a reality that takes an emotional toll on veterinarians and owners alike. [download] But you can sidestep card companies and third-party lenders, and set whatever repayment terms you like on a case-by-case basis. How? By running “a turnkey financing program that integrates with the software you use for functionalities around operations, accounting, CRM, and messaging,” says Dmitry Voronenko, CEO and co-founder of TurnKey Lender, a provider of in-house lending software used by businesses in more than 50 countries worldwide. “This in-house approach lets veterinarians set financing terms that covers their risk and frees them to treat their customers’ pets to the best of their ability.” Bridging the value-perception gap Most pet owners adore their animal companions. Two in three of them claim to look after their furry companions better than they look after themselves, according to a 2021 survey of more than 2,000 “pet parents.” Signs of this pet-centric prioritization include feeding and walking pets, celebrating events like National Dog Day (August 26, if you were wondering), and letting animals sleep on human beds. But pet owners draw lines when it comes to paying for veterinary care — lines can erode the veterinarian’s already thin profit margins. And the gap between what owners consider fair pricing and what veterinarians charge is notable. For example, the average dog owner thinks a fair price for an “essential vaccination package” is $59, while vets typically charge about $75, according to the Veterinary Hospital Managers Association. [related-solutions] Meanwhile, the public perception of veterinarians, traditionally positive, has darkened in recent years. Major news outlets contend there’s a glut of animal doctors, and claim they charge too much. While some industry sources push back on some of these notions, the view on the profession seems to have soured. Even more damaging to the reputation of the veterinary industry is the idea — championed in newspaper “lifestyle” sections — that slews of people adopted pets as companions during lockdowns, and vets are now determined to make bank on all these sad-eyed adoptees. In fact, as the American Medical Veterinary Association demonstrates, pet adoptions were down, not up in the first year of the pandemic. The confusion arises from reports that animal adoptions were way up in early Covid — which is true, but only because there were a lot fewer pets available at shelters. There was an 18% drop in 2020 animal-shelter adoptions compared to 2019. And veterinarians saw overall productivity drop by 25% in 2020 relative to 2019. Plainly, veterinarians aren’t living it up on the backs of lockdown pets and their owners, but the idea is out there. Seeing if lending tech can help in any way In the best of times, healthcare workers are more susceptible to anxiety, depression, and burnout than the general population, according to the AMVA. The precise reasons for despair are open to interpretation. Research indicates that veterinarians cope with the anxiety-inducing pressure familiar to medical practitioners — but with unique burdens, such as: Patients that can’t say how they’re feeling or what they might have done to get sick High education-debt-to-income ratios (For physicians, it’s roughly 130%; for veterinarians, it’s 250%, according to the AMVA — and the AMVA’s calculation doesn’t include undergraduate loans. Consumer lenders tend to favor credit applicants with debt-to-income ratios under 28%) High euthanization rates — amid signs that rates vary with macroeconomic conditions (The city of Hamilton in Canada saw euthanization rates at animal shelters go from an all-time high of 55% in 2008 against a backdrop of financial uncertainty to 22.5% in 2014, with the economy on the mend) The euthanization of pets hits veterinarians especially hard. As one told Time Magazine in 2019, “You can say you’re going to be stoic and put it out of your mind, and say it’s part of being a veterinarian but the reality is that, over time, it weighs on you.” And while it’s hard to talk about these things, it is part of life and if embedded finance can alleviate even a small part of this stress for vets and help even a fraction of the animals get the care they need, it’s worth it. Better business through technology Using advanced in-house financing software like TurnKey Lender, your veterinary practice can provide instant financing options to pet owners, and decide who qualifies for financing. Clients apply, and the financing software automatically pulls customer data from credit bureaus, bank statements, and other sources. Then, using advanced artificial intelligence to match inputs against the loan parameters you determine (including risk tolerance), the software suggests a credit decision that reflects your requirements. TurnKey Lender’s financing platform allows veterinary customers to easily manage financing options, make payments, submit documents, track installment statuses, or apply for additional funding using a secure app. Practices meanwhile can stabilize cash flow to offset income seasonality, and build customer loyalty to ensure repeat business, boosting your customers’ lifetime value. Another way TurnKey Lender helps veterinarians is through “white labeling.” This means TurnKey Lender’s branding won’t compete with the clinic’s. Meanwhile, the modularity of TurnKey Lender’s platform means practices only use — and only pay for — the parts of the lending suite they want. And modules can always be added as new needs arise. “We’re in business to help veterinarians succeed using a scalable, affordable and intuitive credit program, and our time-to-market is unmatched,” says TurnKey Lender’s Voronenko. “We make medical
What IVF Patients Need to Know About Financing Their Treatments
In-vitro fertilization patients have a problem. Fortunately, it’s a problem technology can alleviate while improving health outcomes, and making patients’ finances more efficient and manageable. We’re talking about money, of course. Some patients can’t afford needed treatment for themselves or loved ones, especially where deductibles and other limits outpace insurance coverage. For this reason, treatments by dentists, plastic surgeons, and endocrinologists who specialize in IVF can be especially hard for consumers to access. And IVF is expensive. Just one “cycle” of treatment can cost close to $25,000, according to the New York Times, citing FertilityIQ. On average, people need three to four IVF cycles to conceive. Even when a third-party credit provider like CareCredit (a spinoff from GE Capital) is in the picture, patients can be denied treatment or assigned crushing interest rates that make treatment prohibitive. Outcomes can be similar with consumer-lending departments of banks, big or small. [download] Are you in the right place for IVF? Before we explore IVF financing in more detail, let’s make sure we’re on the same page about what IVF entails, and how to locate a suitable specialist. You have an emotional support system in place. This can come from your partner, your family, your friends, a trained counselor, or all of the above You’ve been trying to get pregnant for a while (six months if you’re over 35; for a year if you’re any younger) You plan to get a thorough examination by your gynecologist before you start IVF treatment, and test the viability of your partner’s sperm You’ve asked your gynecologist to refer you to some endocrinologists who specialize in IVF. (Another trusted resource is the Society for Assisted Reproductive Technology website.) You understand the side effects of IVF medications. As a result, you know that scheduling treatment for times when you’re less stressed — slower periods at work, say — can lead to better outcomes If you’ve checked most of these off your list, and feel you’re likely to seek IVF treatment, then it’s time to review the option of working with a practice that offers financing but doesn’t hive it, and your private information, off to outsiders. Increasingly, once a medical practice has chosen a credit vendor to facilitate its clients’ treatments, how the lender treats the practice’s patients is out of the practice’s hands. Third-party lenders can get in the way That can hurt patient-doctor relationships. “When a third-party lender enters the picture, the rapport and trust the patient and practice have established, sometimes over years, can be compromised,” says Elena Ionenko, co-founder and head of operations at TurnKey Lender, a leading lending-tech maker that helps borrowers and lenders in more than 50 countries worldwide. Patients receive the third-party lender’s paperwork (with branding throughout), as well as promotional emails and other missives designed to lure patients to unaffiliated practices for subsequent treatment as the lender “seeks to add more practices to its customer roster,” adds Ionenko. Bluntly, third-party healthcare lenders aren’t there for your good. They exist to make money by lending money, a mission that has nothing to do with health. But when patients are denied financing, or get late fees for missing payments, they tend to blame the practitioner, not the third-party financier. Things can get dicier when a patient’s zero-interest introductory period ends, and sky-high rates stipulated in the fine print rush into effect. Again though, despite the head-turning impacts of a third parties’ harsh penalties and high rates, it’s the doctor whom patients blame when the financing goes awry. IVF can set a patient back by $100,000 At any given moment these days, non-refundable, out-of-pocket medical procedures in the US account for about $4 billion. No less than a quarter of that will fall into arrears, with some of that debt sold to collection agencies. This can lead to financial hardship, both for patients and the healthcare providers they rely on. Meanwhile, IVF patients frequently need healthcare financing — and when what’s at stake is the ability to conceive a child, emotions, along with prices, can run sky-high. Because of this, patients seeking in-vitro fertilization are often better served by clinics that don’t outsource their lending — and it’s why patients should understand their providers’ financing arrangements before they even try to secure financing. With the stakes of starting a family about as high as it gets, IVF patients require as much sensitivity as a practice can muster — and that must extend to the financing piece. What to look for, and what you get in return As a result, IVF patients who need financing for treatment should always look for practices that: Extend credit in the first place, says personal-finance site Nerd Wallet Keep their lending in-house, and strictly between the patient and the practice The benefits to patients of doing business with IVF clinics that keep their lending in-house through smart new technology include: AI-enhanced credit applications that give a fuller picture of you as a borrower than credit scores alone can Safety. Your lender may be a medical practice, but it’s still subject to consumer-protection regulations that apply to other lenders Security. Healthcare practices that use TurnKey Lender have security safeguards that exceed regulatory requirements and best practices. For example, TurnKey Lender has SOC 2 Type I and SOC 2 Type II level compliance, and the globally-recognized ISO 27001 Certification Speed. Applications that used to take weeks to review can be processed in minutes “Luckily, this isn’t a zero-sum game,” says Ionenko. “In-house lending — made easier than ever by means of cost-effective, intuitive, user-friendly technologies — is also beneficial to healthcare practices, which get a better rate of return on their lending because they set and keep transaction fees, which can be as high as 6%.” Practitioners who offer in-house tending can also see a significant boost in order value, purchase frequency, and sales conversion, Ionenko adds. “It’s when you get this sort of de facto alliance between patients and healthcare professionals that’s centered on the efficiency of new technologies that new and healthier ways of paying for specialized treatments come into view.”
Six Standout Reasons IVF Clinics Need In-House Financing Software Right Now
Most components of in-vitro fertilization aren’t covered by healthcare insurance, private or public. But you knew that. You’re a reproductive endocrinologist, or you work for one, and you’re familiar with the challenges some patients experience raising the $12,000 to $17,000 they need for a single IVF cycle and much more for prescriptions. You know equally well that, choices for patients lacking significant personal savings (or friends and family that do) are limited to charities like Gift of Parenthood, specialist third-party lenders like Eggfund and Future Family, outsourced point-of-sale vendors like Lending USA and Ally Lending, or one of the few traditional banks that might contemplate IVF financing. But what if you did it yourself? What if you were to fund IVF procedures in-house with all the risk-management safeguards of a name-brand lender (and more), and all the functionality and ease-of-use of an advanced financial-technology platform? [download] Your peers are catching on: in-house IVF financing is the way to go In fact, these lures are already attracting IVF specialists, whether they’re looking to personalize patient service at an established practice or working to build a new practice using the best technology available for making loans and managing installments. The global fertility services market is expected to grow from $16.948 billion in 2020 to $18.475 billion in 2021 at a compound annual growth rate of 9%, according to Research and Markets. The market is expected to reach $28.236 billion by 2026 at a CAGR of 11%. Your peers are learning that leading-edge financing technology does four things to make in-house fertility financing not just an option, but, just maybe, the way to go. They’re turning to tech-fueled in-house lending to capture a number of advantages, including: No-friction integration of lending software and existing system applications like those used for billing, practice management, and patient-relationship management. It’s hard to exaggerate the power of being able to run multiple interconnected systems without fear of outages and other snafus Low-risk credit decisions via artificial intelligence and machine learning, which can also leverage alternative criteria to give you more complete financial profiles of applicants Customizable financing terms to reflect an individual patient’s creditworthiness, provide incentives, or outflank third-party lenders and their term-limited “no interest” offers Cloud storage that streamlines operations, frees up space and ensures recoverability for compliance and analytics Further, IVF practices that offer in-house fertility financing can see a 120% order growth after implementing in-house financing, and a 17% boost in sales. After all, 93% of US medical patients use consumer credit facilities at one point or another. “With benefits like these stemming from fairly recent innovations, it makes less sense than ever to refer patients out for funding,” according to Dmitry Voronenko, CEO and co-founder of TurnKety Lender, a white-label lending-technology provider that supports businesses in more than 50 markets worldwide. “But a financing system that can integrate with a practice’s existing technology infrastructure is a must because it removes the burden of data storage and disaster recovery from the practice, and if it makes customization easier.” Still, some medical practitioners fear that offering fertility-treatment loans in-house can mark a practice as “down market.” In fact, well-to-do patients like to have credit as an options=, with 60% of US high-wealth families using credit cards “regularly” ( versus 70% of the general population), according to Creditcards.com. Whether they’re incentivized by convenience, cash-back offers, travel points, or fraud protection, sophisticated patients tend to take a strategic view of credit. You can expect them to view IVF expenses in a similar light: they may not need credit, but they may well prefer it for any number of reasons. Counting even more ways: a dynamic approach to IVF funding “Well-off infertility patients may not need IVF financing the way some of us would,” says Voronenko. “But they expect to see it on the menu because it gives them the freedom to deploy funds as they see fit, often in keeping with household budgeting criteria that make monthly installments preferable to upfront cash payments in full.” And making sure lending is available makes even more sense for reproductive endocrinologists. As with plastic surgery, treatment in your specialization is considered a “big ticket” medical expenditure. In fact, 15% of all big-ticket medical procedures are already financed. For specialists, in-house financing isn’t just good customer service. It also facilitates a dynamic approach to financing that can enhance your practice. Among the benefits, these six stand out. 1. Performance We’ve seen, in industry studies and our own experience, that our software can help can boost in-house lending portfolio’s performance across the board” — from decreasing bad debt by as much as 35%, trimming decision times by 15% to 30%, boosting profits on financing arrangements by as much as 40%, and increasing the lifetime “value of some patient relationships by 25%” — says TurnKey Lender’s Voronenko 2. Control For an in-house lending program, you set the terms and fees you prefer in a white-label environment with no need to share fees revenue with anybody but, alas, the taxman 3. Ease You don’t need prior experience in financial service. A great vendor for healthcare practices will make you an “expert” at the pull of a switch by providing training, intuitive interfaces, and procedural options in plain view while reducing repetitive and error-prone tasks), and providing unambiguous messaging for turnkey loan management and communications. And it’s all backed by client-centric support 24/7. As for your patients, they can use a secure smartphone app to check their balances, update payment methods, and upload relevant documents 4. Intelligence IVF practices should hold out for an in-house lending platform with AI that harnesses the power of deep neural networks and self-learning scoring models to evaluate borrowers in real-time and make confident credit decisions in seconds rather than days. A platform suited to a busy medical practice should be flexible enough to take stock of alternative inputs beyond the usual application forms and credit-bureau scores, and shine a spotlight on aspects of personal financial behavior around spending debt-repayment habits 5. Modularity A financing-software vendor should provide a checklist of functionalities to match the specific needs of your IVF