The intricacies of embedded lending

In the world of commerce, payment methods are often seen merely as the final step in a purchase journey, a bridge from browsing to buying. While offering a diverse array of popular payment solutions, including pay-over-time options, is undeniably crucial for customer conversion, there's one method that transcends this traditional role.

Embedded lending is more than just a way to settle a transaction; it's a strategy that empowers merchants to give their customers the financial flexibility they desire from BNPL-type services, while simultaneously fostering deeper customer loyalty and elevating their brand's value.

Here is how embedded lending (when done right) can actually drive a brand’s customer loyalty.

What is embedded lending?

Embedded lending is the process of offering loans or other credit products directly to consumers and businesses by integrating them into a non-financial user journey.

It provides the customer with a linear user experience that keeps them within the merchant’s customer journey – and doesn’t require an app download or redirect to another website.

Why is embedded lending important?

In the competitive landscape of modern commerce, customer loyalty is the gold standard for success. Embedded lending takes payments beyond the conventional transactional relationship between merchants and customers. It introduces a layer of financial empowerment and flexibility that resonates with today's consumers and business buyers. By embedding bank financing and loan options into the user journey, embedded lending transforms transactions into more than just sales; it becomes a gateway to enhanced customer experiences and long-term loyalty.

Driving customer loyalty through embedded lending: five key considerations

Merchants that want to harness the loyalty-building capabilities of embedded lending need to ask themselves the following questions when choosing an embedded lending provider.

1. Who is the lender?

Fair and responsible financing is synonymous with banks. Their unmatched expertise in lending, combined with robust underwriting capabilities and solid balance sheets, sets them apart in the financial landscape.

By embedding financing solutions from these trusted banking institutions, merchants not only offer a flexible payment option, but also cement a bond of trust with their customers. A telling statistic from Accenture reveals that 40% of shoppers would opt for BNPL options if they were bank-affiliated.

Transparent and fair lending practices establish trust between the merchant and the customer. When customers feel confident that they are making well-informed financial decisions, they are more likely to return for future purchases.

Trust is what transforms occasional shoppers into lifelong customers, as people tend to gravitate towards brands that genuinely prioritise their financial well-being.

2. Is the solution branded for the merchant or the provider?

When customer financing is white-labelled for the merchant, it ensures that customers remain immersed in the merchant's branded experience, free from diversions to external third-party sites or apps which risk exposure to competitor brands.

White-labelling not only enhances user experience but firmly anchors customer ownership with the merchant, reinforcing their brand presence and loyalty.

3. What are the financing approval rates like?

When a customer seeks financing through a merchant and is unfairly rejected, it can tarnish the perception of the brand, even if the merchant isn't directly responsible for the lending decision. However, with a multi-lender embedded lending solution, a customer's application moves from tier-1 banks to secondary regulated lenders. This approach significantly amplifies the likelihood of approval, safeguarding the merchant's brand reputation and enhancing the customer's experience.

4. Are the financing options tailored to provide a personalised user experience?

Tailored financing options allow merchants to offer flexible repayment terms, aligning with individual financial preferences, risk profiles, ticket sizes, and product choices. This personalisation acknowledges customers' unique circumstances and fosters a connection, enhancing their loyalty as they feel valued and understood. For example, a customer buying a microwave needs a short-term financing option, while a business buying office furniture would need a longer-term instalment loan.

5. Who owns the data?

Armed with transactional and financing data, merchants possess a powerful lens into their customers' preferences. Leveraging these data-driven insights, they can craft customised journeys and fine-tune financing options, delivering unparalleled value. As customers experience this tailored approach, their trust in the brand deepens, cementing a foundation of loyalty.

From one-time transactions to committed customers

Embedded lending transcends traditional payment methods by bridging the gap between transactions and long-lasting customer loyalty.

Its power lies in giving customers instant access to responsible financial options at their time and place of need, thereby providing them with the financial flexibility they require without compromising their financial well-being – all essential elements of a strong and enduring merchant-customer relationship. By embracing white-labelled embedded lending, merchants can elevate their brand from being just a transactional stop to a trusted partner in their customers' journey.

About Yaacov Martin

Yaacov Martin is CEO of Jifiti, a global embedded lending technology company that he co-founded in 2011. An advocate of responsible and accessible financing, Yaacov is an embedded lending thought leader, speaker, and active contributor to leading banking, payments, retail, and fintech publications.

About Jifiti

Jifiti is a global fintech company that powers white-labeled embedded lending solutions for banks, lenders, and merchants worldwide. With Jifiti’s robust platform, merchants can easily embed any consumer and business financing programme at any point of sale, online, in-store, and via call center. Jifiti works with leading merchants and financial institutions, including IKEA, Sonae, Coppel, Mastercard, Citizens Bank, CaixaBank, Credit Agricole, and others worldwide.

Embedded lending: from seamless payments to endless customer loyalty