The financial services landscape is experiencing a significant shift towards customer-centric solutions in the digital economy. Innovations like embedded lending have revolutionized the ecosystem, placing small and medium-sized businesses (SMBs) in the spotlight.
Empowering SMBs:
Embedded lending has empowered SMBs to take control of the development and delivery of financial products. Instead of merely reacting to market trends, SMBs are now designing the commerce experience to achieve their desired outcomes.
Revitalizing Merchant Aggregation:
Early innovators such as Square, Shopify, and Affirm have reshaped the business model by integrating credit tools and borrowing capabilities directly into the purchasing process. This approach not only influences end-user behavior but also elevates SMBs in the financial landscape.
Unpacking the Embedded Lending Opportunity
The integration of buy now, pay later (BNPL) options within eCommerce platforms simplifies the shopping experience for customers. By offering financing options directly, SMBs can broaden their customer base and increase sales volumes.
Customized Solutions:
SMBs actively shape financial products by partnering with FinTech companies to tailor lending solutions based on customer needs. Access to valuable customer data enables businesses to offer personalized lending options, enhancing the customer experience.
Market Response:
The market is responding with new solutions, such as Rainforest and Gynger, which have raised significant funds to expand their embedded payments and financing platforms, respectively.
Embedded Lending’s Big Potential for Small Businesses
According to PYMNTS Intelligence, 37% of SMBs are interested in switching to providers offering embedded lending options. However, there is an untapped opportunity as lenders have not fully embraced this potential.
The Lender’s Perspective:
The PYMNTS Intelligence report reveals that while consumers and SMBs are interested in embedded lending, lenders have shown tepid interest in offering these options. There is a significant opportunity for lenders to engage and retain SMB customers in this space.
Unmet Need:
Arvind Ronta, global head of BNPL and embedded finance at Visa, highlights the gap in how lenders are offering embedded lending products to small businesses. This presents a substantial opportunity for lenders to address critical marketplace needs and tap into the vast potential of the SMB market.
In conclusion, embedded lending is reshaping the digital economy by empowering SMBs to drive financial innovation. As businesses and lenders embrace this transformative trend, the future of financial services for SMBs looks promising.