Embedded finance is turning the lending industry on its head, empowering financial institutions and SaaS companies alike with the tools they need to quickly connect their customers to capital.
Two years ago, embedded finance was barely getting off the ground. But by 2020, it had blossomed into a $22.5 billion industry and is now projected to reach $7 trillion by 2030.
So how will fintech’s latest boon become a multi-trillion dollar industry within a mere decade? And how will the emergence of embedded finance impact how we access capital, obtain funding, and secure other financial services in the future? Here’s what you need to know:
Embedded Finance as a Multiplier
Embedded finance is a true competitive driver; companies embracing it are diversifying their existing product lines and delivering better value to their customers.
There are many practical, subset use cases of embedded finance. Embedded lending, for example, fills a void for SMBs by making capital more accessible than traditional lenders ever could. Lending has long been an industry fraught with inefficiencies, and many key players, including lenders and SMBs, have suffered as a result.
But embedded lending is redefining the industry, putting powerful resources into the hands of the very SaaS companies that service SMBs day in and day out. Leveraging customizable APIs and white-labeled solutions, SaaS companies can now integrate embedded lending services directly into their platforms and connect their SMB customers to the on-demand capital they need to remain viable.
In turn, these SaaS companies are creating a new revenue stream, boosting their product stickiness, reducing churn, and creating more value with embedded lending.
How is Embedded Finance Improving the Lending Process?
Embedded finance platforms fill a vacuum by ushering in more sophisticated and tailored decisioning when lending to a variety of niche industries. By leveraging a combination of a marketplace, contextual product placement, and powerful data services, Lendflow is the only platform transforming how capital is accessed in ways that benefit all parties involved:
- Expand product portfolios for SaaS companies: Embedded finance enables a non-financial SaaS company to facilitate the connection between lenders and SMBs. For SMBs, this means greater access to capital — right at their point of need — from the SaaS companies they know and trust. For SaaS companies, embedded lending is an easy way to diversify their product portfolios and deliver even more value to their customers.
- Boosted reach and operational efficiencies for lenders — Embedded financing platforms also serve the banks, credit unions, and traditional lenders that partner with them behind the scenes. Leveraging the real-time data analysis capabilities ushered in by embedded finance, these institutions can now automate manual processes and offer superior loans and services — rapidly — to an entirely new network of customers. Joining Lendflow’s marketplace leaves lenders harnessing a greater reach of qualified borrowers, since lenders immediately become connected to qualified SMBs. And by utilizing Lendflow’s Credit Data Services, lenders become more equipped than ever to strike optimal loan agreements. Data that was once hard-to-find on SMBs, including information pertaining to KYB, bankruptcy and liens, now remains at lenders’ fingertips through Lendflow’s APIs. More automated decisioning and less manual reviews leaves lenders reaping more efficient risk assessment capabilities and improved operational efficiencies. Existing lending operations can therefore not only be digitized, but also enhanced with Lendflow.
- Enhanced customer experiences and better outcomes for SMBs — Many SMB customers don’t receive the loans they need because traditional lenders fail to use a tailored approach when crafting specific loan agreements, let alone offer the right products for each SMB’s particular situation. Embedded finance has redefined this process through powerful data services, including data aggregation, orchestration, decisioning, monitoring, and more that allow lenders to better assess risk and provide more tailored, competitive loan offers to SMBs. Lendflow reduces friction across parties in the lending process. SMBs can now apply for capital from within a product that they’re already using and already comfortable with. By leveraging the preexisting partnership in place between a SaaS company and SMBs, capital can suddenly be accessed much faster. Heaps of paperwork filing and appointments at local bank branches become replaced by an altogether transformed process based on convenience, speed and assurance. SMBs benefit from convenience because they can now apply for loans from their payroll or timesheet providers. Instead of a months-long drawn out application process, Lendflow expedites the filing of a loan application to become a matter of minutes — with approval being turnaround within 24 hours. And SMBs can rest assured that the likelihood of loan approval rises within Lendflow’s marketplace, since Lendflow partners with lenders that specialize in their industry and firmly understand their specific capital needs.
How Traditional Lending Institutions Must Adapt
To keep pace — and stay relevant — amid embedded finance’s emergence, traditional lending institutions will need to embrace automation and on-demand servicing. That means taking their services to the very platforms — SaaS companies — that engage with their SMB customers daily. This is the future of point-of-need capital delivery.
Marketing and distribution strategies across traditional lenders will undergo a fundamental paradigm shift as well. Financial institutions currently spend millions of ad dollars on traditional marketing channels to get in front of existing customers and unearth new ones. By partnering with a SaaS company that has an embedded finance platform, lenders can get access to more qualified — and eager — customers within a contextual experience.
Paving a New Path Forward
The traditional lending landscape remained stagnant for far too long, making it ripe for innovation.
Lendflow is disrupting the industry, empowering lending institutions and SaaS companies to work together to provide SMB customers with capital quickly, efficiently, and at the best rate possible. With our expansive marketplace, embeddable widget, and detailed credit data services, we make embedded lending easier than ever.
Are you ready to deliver seamless, contextual financial experiences that delight customers and increase engagement? Contact us today to get started!