How Can Financial Institutions Engage With Embedded Lending?

The intersection of technology, banking, and commerce has given rise to fintech innovations. Embedded lending, the practice of offering lending through non-financial products or services and integrating them into digital interfaces, continues to reshape consumer spending and evolve lending relationships. In a recent survey by CFO.com, 76% of executives say embedded lending is a massive growth opportunity. Respondents made it clear they believe it is the future of consumer lending activity.

Partnering with fintechs, specifically third-party originators, is a valuable strategy for lenders to remain competitive and economically attract new customers. The fintech company automates point-of-sale lending end-to-end and streamlines, simplifies and modernizes the entire process while reducing security risks. Given how consumers now demand simple payments, have minimal tolerance for risk, and are unwilling to accept more friction—embedded lending presents lenders with a timely and rewarding opportunity.

Lenders Gain a New Avenue for Capital Deployment

Embedded finance partnerships integrate a financial technology solution placed directly into a checkout flow, with the lender supporting the transaction on the back end. The fintech solution enables merchants to offer financing while the lender gains a new avenue for capital deployment. APIs and advanced underwriting techniques create a simple and frictionless customer experience. The seamless digital process allows lenders to cross-sell the consumer and expand their market reach.

An Overview of Different Fintech Partnerships

Lender-Fintech partnerships may operate in a few main ways:

Originate-to-Hold

• Financial institution enables lending through the fintech platform
• The customer applies for, is approved, and accepts funding for their loan
• The lender retains title and the customer for the life of the loan

Originate-to-Sell

• Financial institution enables lending through the fintech platform
• The customer applies for, is approved, and accepts funding for their loan
• The lender originates the loan for the purpose of distribution
• The loans are sold to another financial institution

‍Originate-to-Syndicate

• Banking institution enables lending through the fintech platform
• The customer applies for, is approved, and accepts funding for their loan
• The lender originates the loan for purposes of aggregating with other loans
• Loans are packaged and securitized into the capital markets‍

What Are the Benefits of Embedded Lending for Financial Institutions?

• Create additional lending avenues
• Access new customer pools
• Streamline user experience
• Enhanced analytics and credit decisions
• Built-in compliance and security
• Real-time payment rails

Momnt Offers an Embedded Lending Pipeline for Lenders

One of our platform’s key features is combining customer data with advanced analytics to deliver personalized financial products and services within an industry-leading platform. Extending attractive and tailored loan offers directly through a merchant with which consumers already have an existing relationship becomes a reality through the power of embedded lending.

Partnering with Momnt, a financial services technology platform, allows lenders to distribute capital through our embedded lending solution. Lenders can attract new flows in resilient asset classes with attractive risk-adjusted returns. Institutions on our platform leverage our built-in compliance, customer-centric product offerings, closed-loop funding, and digital application and transaction process to develop new customer relationships and incorporate fintech into their strategy.

Are you a lender interested in embedded lending as part of your go-to-market strategy? Contact our Capital Markets team to learn more about lender partnerships.