What are we to make of a world where Uber floats credit cards and Amazon lends out loans? Maybe, embedded credit is the new rage, like talking digital assistants were a couple of years back.
But let's rationalize the hype. Starting off a financial services arm - akin to something like Facebook or Amazon extending loans - is so much more than a few lines of code. Offering credit involves money (other people’s money) that must be handled as per regulations and as per a ‘trust model’ that has stood the test of time. A non-financial company, venturing into the realm of lending, has to toe the line.
Does that mean going through similar motions and ending up becoming a bank, because how else? Not quite. Fintechs can help businesses crack the code on embedded credit. They bring in the infrastructure to modernize what banks have traditionally done through core systems - with a platform that can be overlaid on any business model. Or in other words, the infrastructure that lets businesses offer credit to the next billion - without creating a financial services arm.
Figure 1: A flexible payments infrastructure. Source: McKinsey
Businesses, especially B2B, are likely to retain clients when they offer financial products that eliminate the need to turn to a bank. Since the customer making a transaction has already traversed through three-fourths of the customer journey, a loan at the checkout only makes the last-mile conversion faster and easier. This leads to a higher average order value, better customer experience and repeat transactions.
Figure 2: Players at the intersection of finance and technology
And not just that, embedded credit creates an additional revenue stream where businesses can mine relevant data to predict customer needs and offer customized products (with accompanying lines of credit) to sweeten the deal.
At FinBox, we are helping marquee businesses do just that with our full-stack embedded finance technology suite. We make credit just one of the awesome things you do, without worrying about how the wheels turn. See it in action here.