Expand Customer Reach with Embedded Financing

Embedded financing is quickly becoming a topic of interest among financial institutions (FIs). And with good reason—providing financing for consumers at the point of sale creates a seamless and convenient customer experience and additional revenue for the FI. 

Embedded financing allows consumers access to credit services through nonfinancial entities on their digital platforms or apps through an API with a financial institution. This provides convenience to consumers and increases the likelihood of online conversions for both nonfinancial entities and FIs.

The opportunity is huge, too. According to Bain and Company, “embedded solutions will more than double from $21 billion in 2021 to $51 billion in 20261.” This new revenue stream should be seriously evaluated by FIs. 

Here are some considerations before taking the leap.

1. Explore the opportunities

With the popularity of digital and mobile banking, embedded financing is a way for FIs to expand their reach and gain new customers and members. Partnering with retailers and service providers allows you to attract consumers you may not have had access to before. For instance, young professionals just starting out will need to furnish an apartment and purchase a car. So, where better to partner than with a local auto dealer or furniture retailer? Similarly, small business owners could be looking for equipment and find the convenience of a line of credit through embedded financing. 

Not only can FIs attract new consumers, but they can also bring in new data through the nonfinancial platforms. This data, including consumer buying behavior, can help assess the creditworthiness of a consumer more thoroughly and accurately, leading to fewer defaults.

2. Assess the risks

As with all technologies from third-party vendors, potential security risks are real. FIs need to vet their embedded financing partners well. APIs are commonplace, but they could also open up security risks. Be sure to carefully review the security profile of all vendors and address any concerns upfront.

With fintechs as the conduit in embedded financing, they have most of the control over the initial customer experience. For this reason, FIs must diligently ensure that Know-Your-Customer (KYC) compliance is followed, along with data privacy rules, security, and compliance. 

3. Nurture new customer relationships with UIM

Embedded financing can be an innovative offering for your institution, and remember that it provides you with more than just a transaction—these are customers or members to continue nurturing. Using Glia’s Unified Interaction Management (UIM) platform provides real-time service and support when these credit customers need it. This further develops the customer-business relationship, from the application to loan payoff and any other journey they embark on. UIM streamlines interactions for easy and quick resolution of any matters that arise, such as late payments or credit line increases, which enhances the overall customer or member experience and builds loyalty.

Embedded financing is a new potential area of income for FIs which expands customer reach to help grow business and build relationships. Using UIM as the customer experience platform, FIs elevate the level of service, providing real-time support and guidance.

For more information on how UIM can foster relationships with any customers or members, read our blog, Beyond CCaaS to UIM.

1 Bain, Embedded finance transaction value to more than double to $7 trillion in US by 2026, but financial institutions must move quickly to keep up—Bain & Company and Bain Capital report