WhiteSight

2023 Roundup: Payment Titans Go All-In on the Embedded Lending Revolution

Table of Contents

Payment Platforms' New Side Hustle

Remember when payment pros caught the digital payment craze during the pandemic?

Well, as the pandemic subsided, the sky-high growth rates in digital payments that payment firms enjoyed have also tapered off. To compensate for this slowdown, numerous payment companies are now turning their focus to the burgeoning field of embedded finance.

Why payments, you ask? Well, it’s the ideal gateway for platforms to sneak into financial services. A payments association builds data, trust, and inevitably leads to more banking needs (we’ve got a detailed account of Adyen capturing that journey). It’s like the foundation for payment platforms to offer an entire buffet of embedded finance goodies, levelling up their revenue, user experience, and customer retention game.

So, what’s the fresh buzz that has our attention entangled? It’s all about payment processors and payment networks going all-in on embedded lending in 2023. (Ah yes, the embedded web that keeps weaving).

Think of it like this: existing payment players are expanding their repertoire to provide lending options that go beyond the norm. Today, your favourite payment buddies aren’t just processing; they’re lending a helping hand (quite literally) to both consumers and businesses. As payment firms seamlessly integrate the payment flow, it becomes easier to add more products, just like adding toppings to your pizza – where lending becomes the extra cheese, melting into the slice of our lives with the savoury flavour of ease. 

And with lending stealing the show as the top use case for embedded finance ($141B), followed by payments at $41B, many payment firms are realising that payments are just the warm-up act – the real endgame lies in shifting their focus to embedded lending.

Entering the world of lending makes a lot of sense for payment platforms moving beyond just handling payments. These platforms, equipped with both software and payment services, deeply understand how their customers’ businesses perform and sell. This insight gives them a valuable advantage in making smarter underwriting decisions, ultimately fostering the growth of the businesses they serve. In 2023, a discernible pattern unfolded as payment processors and payment networks were seen leading the charge into the embedded lending realm. 

Payment processors engaged in collaborative ventures with diverse lending partners, catering to both consumers and businesses alike:

    • Rapyd teamed up with Splitit to leverage Splitit’s Installments-as-a-Service platform, helping merchants integrate BNPL as an easy instalment option within their existing purchase process for a secure and efficient customer experience. 
    • SumUp launched SumUp Cash Advance, supported by a $100M credit facility from alternative investment firm Victory Park Capital (VPC), allowing it to offer advance payments to merchants, starting in the UK market.
    • Ingenico and Jifiti joined forces to integrate Jifiti’s B2B and B2C point-of-sale financing options, including instalment loans, lines of credit, net terms, and split payments within the customer journey, in-store and online.
    • Opn’s Opn Payments platform integrated Atome’s BNPL payment method, enabling retailers utilising Opn Payments in Malaysia and Singapore to grow their business while making purchases more accessible and affordable for consumers.

As for the payment networks arena, Visa and Mastercard have prominently positioned themselves as trailblazers in embracing the embedded lending trend. While Visa ventured into launching a card-based embedded lending tool for banks and fintechs with Froda and Lunar for instant loan payouts and automatic repayments via card rails, Mastercard partnered with Lipa Later and ZoodPay for consumer BNPL, and with Galileo Financial Technologies and SAP Fioneer for business embedded lending.

Through such strategic alliances, these payment powerhouses are reshaping the financial landscape with innovative embedded lending solutions, ranging from integrating BNPL options into existing purchase processes to providing cash advances to merchants and incorporating various financing options like instalment loans and lines of credit at the point of sale.

Swipe, Pay, Borrow: Next-Gen Payment Perks

By seamlessly integrating lending into their existing payment processes, these platforms are addressing specific payment pain points that traditional credit cards and BNPL programs struggle with:

    • Empowering Merchants: By embedding lending, payment platforms empower merchants to take control of their customer experience. This shift puts the merchants in charge, helping them nurture and retain customers effectively.
    • Streamlining SME Financing: Lending through payment platforms simplifies SME financing. Businesses can manage loan repayments and payouts directly through their payment cards, eliminating barriers and making financing more accessible.
    • Data-Driven Credit Scoring: Partnering with card issuers gives businesses access to valuable transaction data. This data enhances credit scoring, enabling more accurate assessments of available credit. This, in turn, benefits customers by providing them with pre-scored credit options.
    • Reducing Friction for Shoppers: Integrating lending into payment flows eliminates the need for shoppers to navigate complex registration processes or log into third-party apps for funding. This streamlining reduces friction in the customer journey, preventing frustration and abandoned sales.

 

As payment platforms dive into embedded finance, there’s room for growth in additional areas of embedded insurance, payroll, and investment offerings. As we approach 2024, we’re excited to see how this trend develops, and the role it will play in making life simpler for consumers through expanded platform capabilities.

Authors

Senior Branding Associate

Kshitija is a senior branding associate at WhiteSight, crafting branding strategies and fintech content. When she's not conjuring up new ideas for the company, you can find her dabbling in new hobbies and documenting her experiences through writing and short films.

Senior Research Associate

Risav is a senior research associate at WhiteSight, where he spends his days navigating the complex fintech landscape and poring over market trends. When he's not decoding the world of fintech, you'll find this sports fanatic decoding the perfect curveball on the football field.

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