How Embedded Lending Tech Is Changing Everything so Fast 

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DV interview blog article november 2023

How traditional finance providers can capitalize on the embedded lending revolution

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.”

Share:

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.”

Share:

RELATED SOLUTIONS

img_Turnkey-Lender_Benefits-of-Buy-Now-Pay-Later-services-for-consumers-and-businesses-1920-scaled

Benefits of Buy Now Pay Later services for consumers and businesses

DV interview blog article november 2023

How traditional finance providers can capitalize on the embedded lending revolution