The pandemic-induced tech boom has accelerated the development of new B2B and B2C solutions and ecosystems, especially in finance. It’s drastically reshaping the way businesses operate and the level of service customers have come to expect. Future Market Insights expect the embedded finance market to grow at a substantial CAGR of 16.5% between 2022 and 2032, reaching a market value of nearly $300 billion by 2033. It’s one of the newest fintech strategies lending companies are implementing worldwide to ensure a seamless, end-to-end customer experience in various industries.
Who are the enablers of embedded finance?
The distributors of embedded finance collaborate with technology providers (fintechs) and balance sheet providers (banks) to embed financial products into their customer journey. The distributors are traditional retailers, software firms, marketplaces and platforms, telecom companies and OEMs. They rely on fintechs to maintain and configure technology for delivering financial products via APIs, while banks provide them with the access to regulated licence, risk framework, funds, and a place to hold deposits.
Types of embedded finance products
The most familiar example of embedded lending would perhaps be BNPL (buy now, pay later) services, where a buyer can access a loan at the time of purchase without leaving the website where they’re shopping for, let’s say, for clothes or gadgets. We saw this trend in B2C with solutions like Klarna and Affirm being adopted by almost all major retailers. However, this is only the beginning, as embedded finance similarly facilitates the B2B ecosystem.
In the context of B2B lending, embedded finance can be a powerful tool for lenders to expand their reach and grow their businesses. By partnering with B2B companies, lenders can offer tailor-made lending solutions, reduce friction, improve the customer experience and increase the likelihood of repeat business. Another major advantage is the reduced risk and improved underwriting, as lenders can access valuable data and insights about their customer’s businesses, enabling more informed lending decisions.
A company that has both customers and capital, such as an e-commerce platform, may also be interested in creating their own end-to-end embedded finance solution. Creating an in-house embedded lending solution also requires additional know-how in terms of scoring and portfolio management, as well as debt collection. Whether you’re providing businesses or end customers with embedded finance solutions, your company will also require a loan management system to keep track of the lending lifecycle.
What is a loan management system?
InGain has had an opportunity to work with leading market players to develop an SaaS loan management system (LMS) specifically dedicated to the needs of embedded finance lenders. It offers unseen customisation opportunities that match the unique nuances of each individual company.
An LMS is a lending solution that facilitates end-to-end lending processes for both online and offline operations. A full lending lifecycle management system enables lending processes to be fully automated, from customer onboarding through to loan origination, loan servicing, collateral management, warnings and debt collection.
Embedded finance LMS product features
Keep your company’s future expansion in mind and choose a loan management solution that can facilitate a broad variety of embedded lending services. An LMS should allow you to easily onboard customers, disburse payments and conduct debt collection. Here are the features specific to embedded finance lending you should expect your LMS to cover:
1. Setup customisation
When setting up a new embedded lending product , it’s crucial for your company to be able to customise the LMS features to fit your business model. The system should support a product setup process where you can define specific loan conditions and service fees. If you’re using a no-code or low-code system, such customisation options shouldn’t require any additional IT assistance.
2. Customer data
A very important part of the onboarding process is conducting know your customer (KYC) and anti-money laundering (AML) analysis. Your company can’t legally conduct business with a client through your embedded lending product without completing these checks. A great feature any LMS should have is the ability to renew this data after a pre-defined time period (e.g. every 6 or 12 months).
3. Third-party integrations
Any LMS should be able to smoothly integrate with any third party services you’re already using in your operations, or plan to use. Whether you need data access, scoring, payment solutions or IP telephony, your system should be able to integrate with all the solutions your business needs to operate at full potential. A new LMS should also be able to leverage any existing system your company already has running, such as a data connector or decision engine.
4. Lending as a service options
If your company provides embedded lending as a B2B service, you need your LMS to be able to manage each of your client’s customers separately. You may also have different members of your team administrating the lending processes for different clients – merchants. In this case each team member should also be able to have individualised access to specific clients.
5. Crowdfunding features
If your embedded lending solution features crowdfunding, ensure that your LMS has the required modules that enable you to properly manage all of the lending processes. Does it have the option to connect with APIs or to create your own platform? You may be using a third-party solution for embedded crowdfunding options, or your company may want to create your own solution. Find out more about why your crowdfunding platform should use a loan management system here.
6. Additional features
Some additional features you may want to look for when choosing an LMS for your embedded lending product needs to include an option to acquire new customers by integrating with brokers and affiliate networks. This feature can be further streamlined into a white-label website or mobile application with a predefined customer journey, including multiple company representative onboarding, as well as ready customer self-service portal. Integration with payment gateways for automated loan disbursement and payment collection can also further automate your company’s lending product. If your LMS has the capability to offer real time data for your business intelligence tools, such features will enable you to react more quickly and make better business decisions.
For over 10 years InGain has been supporting the consumer finance industry, fintech companies, and banks with an out-of-the box, yet fully customisable loan management system. On top of the core system, the company also delivers system integration services and custom feature development. InGain has executed hundreds of projects with more than 50 global clients across a variety of sectors.
The loan management system caters to both secured and unsecured business and retail loans, including instalment loans, auto leasing, mortgages, line of credit, buy-now-pay-later, payday loans, invoice factoring and more.