TurnKey Lender Loan Origination System

At TurnKey Lender our team has been pioneering the embedded finance revolution for years, promoting the idea that any business can be a FinTech and offer credit products to their clients in-house without outsourcing customer data, relations, and profits to a middleman in the form of a bank or an alternative 3rd party lender.

In the last year the embedded lending trend has been taking over the business world. Its adoption is boosted by the forced digitalization of millions of businesses on the lookout for new ways to convert clients, retain them and ultimately make money and stay profitable in the digital-first economy. 

In this article,  we will give a quick introduction to the world of embedded finance for newcomers and anyone starting to consider adding an in-house buy-now-pay-later option, implementing credit lines, or other model of consumer credit to their operations. 

What is embedded lending and why should your business care about specialty finance options?  

Embedded lending is an approach in which a non-financial business implements in-house customer financing into their operations. This leads to them becoming a specialty lender, someone whose main business does not come from extending credit but who nonetheless offers it and uses it not only as a monetization tool, but mainly to grow their business and reach wider consumer groups. 

As a business owner, allowing your clients to pay for your products or services in multiple installments is only natural and what consumers expect today. But in the 20th century, banks and other specialty lenders effectively monopolized credit as the world was quickly globalizing and credit decisioning had gotten a lot more complex. This hurdle had been too hard to overcome for a non-professional lender up until recently.  

The current state of financial technology and ready-made loan origination systems allows any type of business (be it retailer, insurance provider, telecom, clinic, auto dealer, manufacturer, etc.) to offer in-house financing to their clients directly removing the need for using third parties providers. 

For a business, embedded finance or e-lending is the new trend which may get even bigger than e-commerce and with solutions like TurnKey Lender it can be even easier to launch and run than an online shop. 

At the same time, the customer can enjoy a consistent user experience, build an ongoing relationship with your business, and allows the client to easily build their credit history. Embedded lending comes from the idea that credit should not be viewed as a separate product provided by a different business, it can be natively embedded into the operations of the business.

The only challenge is that in the digital age, you need an intuitive, flexible, and powerful solution to handle originating the finance, making automated credit decisions, charging payments from the client on your schedule and processing data for reporting and analytics.  

The goal of embedded finance with modern software platforms is to create a seamless experience for the borrower so they do not feel or even realize that they engage with a separate platform when they apply for buy now pay later or other credit products with your business. In short, embedded lending allows a business to: 

• Grow conversion rates and revenue on high-value goods and services. 
• Increase the average order size and expand customer reach. 
• Improve customer experience and eliminate middlemen from receiving your customers’ data. 
• Make your products more affordable with little-to-no overhead. 
• Enhance your business with B2C or B2B lending programs that do more for your customers. 

Lending Models Most Commonly Used When Embedding Finance Into A Business

Today any business that sells products or services which may be hard for clients to pay for upfront can and should consider implementing embedded lending. 

Of course, embedded finance comes with a certain overhead, so you do need customers of a certain size to make sure the return on investment is worth it. But with innovative digital software like TurnKey Lender’s, most specialty finance providers don’t need dedicated lending staff and the learning curve is low. Some of the most popular models for embedding finance into a business include: 

• Buy Now Pay Later – Buy Now Pay Later (BNPL) is quickly becoming the go-to model for businesses offering high value and luxury goods, gym equipment, car parts and services, medical products and services, home improvement products, outdoor adventure supplies and much more. It simply allows online shops to let their customers buy products and pay later in installments.  
• Equipment and asset leasing – manufacturing and providers or equipment can lease expensive products for your business, such as machinery, vehicles or computers. With an equipment lease, the equipment isn’t yours to keep once the leasing term is over. Leasing can be secured by collateral or unsecured – depending on your business model. 
• Merchant cash advance – in an MCA model, a borrower repays a percentage of their sales daily or weekly until their full debt is repaid. To achieve that, TurnKey Lender tightly integrates with e-commerce platforms. With us, merchants instead of manually uploading invoices, which can be slow and open to fraud, we can monitor their transaction activity, automatically calculate and execute repayments. 
• Trade financing – trade finance represents the financial instruments and products that are used by companies to facilitate international trade and commerce. Used in supply chains, trade finance is an umbrella term meaning it covers many financial products that companies utilize to make trade transactions feasible. 
• Factoring and invoice finance – An invoice factor purchases the accounts receivables you’re owed and takes over-collecting from your clients. With invoice factoring, the lender will pay you a percentage of the total outstanding invoice amount upfront. 

These are just some of the model’s businesses commonly use, but on a high level, embedded finance is just allowing a client (B2C or B2B) to get a product or service at once and pay you back over time. And the terms that work for you depend on the business logic you prefer and that will work best in your industry. 

Embedded finance implementation options

A number of forces are fueling the rise of financial technology behind embedded lending.

1. Little-to-no embedded lending industry entry barriers  

Software-as-a-service, a subset of cloud computing, is an important concept for an understanding of embedded finance. It refers to the concept of calling on software components across a network to perform specific tasks. In addition to making things easier for buyers, this approach is generally characterized by low barriers to entry, little (or no) cost to implement, and substantial scalability.

2. Interoperability – API-enabled integration is getting easier by the day   

The rise of embedded finance owes a lot to application-programming interfaces – APIs for short. These software intermediaries are what let applications work together – like an embedded financing API linked to the software at the heart of a company’s operations software. And, if you can operate a phone app, you can run an API.

3. Artificial intelligence applied to instant real-life business decisions

AI uses computing to simulate human intelligence for tasks like speech recognition, internet searches, self-driving cars, and deep analysis of would-be borrowers using traditional as well as alternative inputs.

Reflecting on these advantages, TurnKey Lender, a pioneer of the embedded-lending industry, foresees most companies and associations enabling transactions everywhere and anywhere as they compete to win and keep customers and derive more value from each relationship.

On a high level, there are 2 choices when it comes to a way of implementing and running an embedded lending operation.  

1.Delegating credit to a lender – Either a bank or buy-now-pay-later providers such as Klarna or Affirm allow business owners to use their checkout options without any need to manage lending program and its terms which means no control over a client’s data and no added profit to your business. Lenders then instantly repay the business owner and handle collections and relations with your clients on their end.  

2. Implementing a lending program in-house – A custom lending solution is too complex a project and there is no need to take on such an expense as the modern lending platforms provide enough flexibility, configuration freedom and scalability to handle pretty much any kind of business requirements. For example, TurnKey Lender offers AI-powered end-to-end automation of embedded finance and hundreds of businesses in 50+ countries use it to digitize credit. 

Capabilities of Embedded Finance Platforms

Some of the r capabilities for embedded credit providers include: 

• End-to-end embedded finance processes automation that can be up and running within days. 
• Built-in decision engine powered by AI for instant and accurate credit decisions. 
• Vendor management module for work with stores and merchants. 
• Configurable finance application process ties into the customer’s journey on your website. 
• Different versions of the solution are tailored to the key business domains (I.e., retail, auto, medical). 
• Fully white-label system you can tailor to your design and color-scheme in a matter of minutes. 
• Automation of origination, servicing, and collection to digitize every step of the embedded finance process. 
• TurnKey Lender provides a WooCommerce checkout plugin to enable quick and easy integration of online stores with our platform.   

Here’s an example of how your embedded financing process can look like with TurnKey Lender: 

Sophisticated underwriting at the turn of a key

Now, as embedded finance grows in popularity, retailers, healthcare providers, energy suppliers, advertisers, and other organizations that are keen to make buying easier for their customers are enjoying more opportunities for fusing financial services with bedrock offerings.

“That’s a big reason proponents of embedded finance see every company as a potential fintech,” says Elena Ionenko. “It’s like someone predicting in 1994 that most organizations would have websites by 2005. It seemed unthinkable, but it happened because the technology was there to back it up. We’re in an analogous phase where capability and demand are working in tandem to support embedded finance.”

Adds Ionenko: “Even companies with limited on-staff expertise can automate all processes through the life of a loan and unleash the power of artificial intelligence for credit scoring that blends traditional inputs such as credit-bureau score with alternative data around spending habits, and balances the need for easy access for customers with the house’s need to avoid undue risk when it extends credit.”

Intuitive white-label solutions like those on offer at TurnKey Lender empower medical and dental practices to provide financing to patients without banks or other outside lenders siphoning off fees and blurring the patients’ conception of who they’re doing business with.

State-of-the-art embedded-lending technology processes loans at scale at every stage, from pre-approval to settlement, and it’s flexible enough to initiate loans at any point of sale, from e-commerce portals and store registrations in business environments as diverse as checkout counters, equipment showrooms, doctor’s offices, warehouses, and manufacturing plants.

“The result is an independent lending platform that’s capable of delivering and maintaining bank-grade functionality while making customers more valuable,” says Ionenko.

“We’re witnessing a society-wide change in behavior that’s improving how individuals and organizations use financial technology and accelerating the adoption of embedded financial services,” says Ionenko. “These underlying services deliver on the promise of a fairer, less stressful customer experience that benefits the companies that offer them.”

BNPL automation platform that gets it done

BNPL credit is going to take over a bigger part of the lending space and product and service providers need to consider it, because their competitors certainly will.

To maximize the results of a pay later program, it’s better to operate and manage it in-house and for that you need a flexible yet highly automated lending platform. We’re talking something as easy to use as Shopify or WooCommerce.

At TurnKey Lender we work a lot with consumer and commercial BNPL providers worldwide. And having automated all possible kinds of pay later programs, we’ve released TurnKey Pay Later, our ultimate solution for B2B and B2C BNPL providers. 

1. Grow your revenue  – Pay later is here to stay. It’s been proven to help companies grow their margins and revenue, convert more customers, flatten income seasonality, adds a new monetization source, and allows nurturing an ongoing relationship with the client instead of faceless one-time exchanges with a merchant (aka customer loyalty and lifetime value). If your business doesn’t offer it, you’re just missing out because the competitor will. 

2. Keep your revenue in your business  – The right way to do BNPL is to keep it in-house. When you delegate your pay later program to a third-party lender, you make less money on each sale, and you give up  control over the customer data and lifecycle. Don’t let the BNPL lenders reap all the rewards for your hard work and investments. 

3. Control your pay later customer journey – If you’re offering a pay later option, you need to be able to effectively manage it without taking on additional risks or overhead. With TurnKey Lender, you don’t need to be a lending tycoon to make it at least worth it to implement and run a pay later program. You get award-winning smooth interfaces where you can configure the granular details of the application process, credit terms, fees, schedules, credit decisioning, and collections while still getting an incredibly autonomous solution that runs on autopilot. 

Final Insights 

Embedded finance is on an undeniable rise and each day new businesses like yours will join this trend. This article is a quick introduction to embedded lending. If you are interested in seeing how this will work for your business, don’t hesitate to reach out. And if you’re looking to keep learning about the topic, here are some helpful articles for you to do some further research:  

• What You Need to Know About In-House Customer Financing & 4 Business Types That Will Benefit From It  
• How to Start Offering Customer Financing Online
• Learn More: TurnKey Lender Standard Platform Capabilities (With a Bonus White Paper)

• In-house lending solution for embedded finance
• Equipment financing software for manufacturers and distributors
• B2B lending software for traditional and alternative lenders