Practical examples of embedded lending technology

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Embedded finance technology presents a major opportunity for businesses, both within the finance sector and further afield.

You may well have seen news headlines about the forecasted impact embedded finance is set to have in coming years, but what can it do for businesses today?

In this guide, we’ll explore some of the practical use cases for embedded finance and—in particular—embedded lending technology.

But before we delve into that, let’s briefly recap some of the basics.

What is embedded finance?

Embedded finance is the practice of taking external financial products, services, or technology and inserting them into another business’ platform. This will typically be done to add new capabilities into a business’ offering, or enrich their current offering with additional data.

If a business that doesn’t currently have the ability to offer loans, credit cards, or car finance and wants to set up a lending product, for example, it can embed lending technology from an external provider.

Not only does this save the business time and money in getting things started, it helps them to avoid complex regulatory steps that can often arise with financial services.

Embedded finance examples

Embedded finance is a vast category, given the sheer number of industries that use financial services and the unique ways in which they use them.

Here are some of the more common, tangible examples of embedded finance that we can already see in use today:

  • Embedded payments – retailers are increasingly embedding payment handling services, like Shopify’s Shop Pay platform,  providing a familiar and trustworthy checkout experience for new customers
  • Embedded insurance – companies offering white-labelled insurance products from a third-party provider to customers making relevant purchases
  • Buy now pay later (BNPL) – while similar to traditional financing offered on large purchases, BNPL services have almost become a category in themselves; as Klarna and similar platforms shift focus towards financing smaller purchases

In addition to the examples outlined above, one of the fastest-growing areas of opportunity for businesses is embedded lending. It’s also the area of embedded finance that Aro operates in, so we’ll deep dive into the details of it a little further.

Let’s start with the basics – what is it?

What is embedded lending?

Simply put, embedded lending allows companies to offer loan and credit products.

It’s a type of embedded finance, enabling businesses to offer loan and credit products to their customers, without needing to set up the necessary infrastructure from scratch.

Through our platform, for example, businesses can access the UK’s largest digital borrowing marketplace and offer unique loan products to their customers.

Who can benefit from embedded lending?

While many definitions imply that embedded lending is strictly something that benefits non-finance businesses, this isn’t necessarily the case.

Any company, financial or not, looking to expand and add new revenue streams can benefit from embedded lending.

Finance companies

Companies that operate within financial services themselves can benefit from embedded lending, along with other embedded finance solutions, as much as non-finance businesses.

Whether adding new services to their offering or expanding the range of customers they can serve, there can be a lot to gain from an embedded solution.

Examples of companies in this space might include banks, lenders, or retail finance providers.

Non-finance companies

Retailers, insurance providers, even utility companies – the list of business verticals that stand to benefit from adding an embedding lending solution to their offering is vast.

Generally, these companies will benefit from embedded finance by integrating new product or service areas that unlock revenue streams for them.

Embedded lending use cases for finance companies

Here are three tangible ways that finance companies can use embedded lending technology and APIs, like our platform, to expand their offering and improve customer experiences.

Offer additional financial services

Finance companies that don’t currently offer loans or credit cards to their customers can use an embedded lending platform to provide these products.

For instance, a bank that doesn’t currently offer loans could refer their customers to Aro to offer these products to their customers and earn a commission, or they can embed the full process into their website or app – allowing customers to take a loan from their brand, using Aro’s platform.

From the customer’s perspective, the entire experience takes place with their banking provider in a familiar and trusted environment.

Accept referrals

Upsell products and services at the point of sale to suitable customers.

Let’s take the example of an in-store furniture finance provider, for instance, that has accepted a customer for finance. With an embedded lending solution, they could then offer additional financial products, like loans or credit cards, alongside their own.

Decline referrals

Declining applications when there isn’t a suitable product is a missed opportunity for many lenders.

Instead of simply rejecting the customer, an embedded lending solution would enable them to refer the customer to a trusted partner that has a wider lending panel and earn a commission from the referral.

As it happens, we offer the UK’s largest digital marketplace and so are perfectly positioned to help with this.

Embedded lending use cases for non-finance companies

Of course, it isn’t just businesses in the financial services sector that can benefit.

By definition, embedded finance is about plugging finance capabilities into businesses that don’t already have them, making it perfect for non-financial companies looking to expand their offering.

Offer new financial services

A non-finance company like a retail brand or utility provider, for example, can embed a credit broker service into their online platform. This would enable them to offer customers products they wouldn’t otherwise cater for like loans, credit cards, or car finance.

How can Aro help?

Our embedded finance platform provides businesses with access to the largest digital borrowing marketplace in the UK. With such breadth and depth of panel, we can offer your customers a huge amount of choice, as well as tailored solutions for most credit profiles.

Unlock customer journeys with our embedded finance API

Through the use of APIs, it’s both quick and easy to integrate our enhanced decisioning platform into your online journey, creating a seamless experience for your customers. In some instances, where a customer has already provided you with their personal details, we can pre-populate these into our application form. This saves your customers time and provides a better overall experience.

How can we support your business?

In addition to providing a Software as a Service (SaaS) solution, Aro can support your business using our experience and expertise in the financial services industry. The level of support can be tailored to your needs, whether it be help marketing financial products, or support with risk and compliance. We can also provide additional insights into your customers that come through our platform.

A proven track record in embedded finance

Here at Aro, we already have long standing, successful embedded finance partnerships with businesses from a whole range of industries, including banking, retail, and eCommerce.

We are experienced in partnering with businesses from both finance and non-finance industries, making us best placed to offer you guidance on any of the use cases explored in this guide.

Explore your embedded lending opportunity today

With access to the UK’s largest digital borrowing marketplace, Aro is the ideal partner for businesses looking to benefit from any of the embedded finance use cases covered in this guide.

Our flexible integration options allow us to tailor a solution to your specific needs and, with our proven track record supporting businesses across a variety of sectors, you’ll be in safe hands.

Want to deliver personal credit solutions 24-7 to your customers? Reach out to our team and they’ll be happy to showcase our embedded finance offering and suggest which one might be right for your business.

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