Embedded finance implementation: How to get started

A wave of disruption is rising as embedded finance initiatives are gaining momentum in different markets. In fact, a new study - the Next-Gen Commercial Banking Tracker - reports that embedded finance will reach a $7 trillion value globally in the next 10 years. 

With up to $7 trillion at stake, the time really is ticking for brands to go beyond existing capabilities and add significant value to customer experiences. 

So, what now?

Savvy business leaders are already ahead of the curve in this. They know the benefits of embedded finance and understand they need to prepare now for the sea of change that it will bring. 

To do this, they are aiming to develop these four specific capabilities: 

• Agile partnership: Building an embedded financing solution in-house takes significant time. Yet as the market is rapidly evolving, it’s vital to assess whether not having embedded financing sooner will affect your business adversely. Partnering will address this immediate need and enable a rapid go-live compared to an in-house build. 
• Trusted security: Provisioning of financing and the associated money laundering challenges are traditionally highly regulated and often require specific licences and registration from local regulators and authorities. 
• The right data: Before deciding to build, it is critical to establish which data points are needed and how to source them. 
• Financing: Financing is capital intensive. It takes on average 24 months to build a track record and most internal builds rely on equity capital for initial fundings, resulting in downside risk from defaults.

In summary, business leaders should begin building their capabilities in - agile partnerships, trusted security, the right data, and financing - now to ensure they don’t lose market share or their slice of the $7 trillion embedded finance revenue pie. 

📕You can read more about whether to buy or build your embedded finance solution in our latest guide here.

What to consider when planning your embedded finance implementation

The process to implement embedded finance products usually begins with a small pilot project. Your third-party embedded finance specialist will host an application page for you that you can insert in your user journey. This can be done is as little as seven days via white-labelled pages - some of YouLend's partners rename their version of the product to stay even more on-brand, for example using "[Partner-name] Capital", "[Partner-name] Business Finance" and "[Partner-name] Advance" when presenting it to their merchants.

This sort of pilot doesn't require any major changes to your established product roadmap. Once the legal agreements are in place and the terms of the pilot are set, you can turn the tap on and see how your merchants or users respond to it, at very little reputational risk.

While the pilot is in progress, you can explore a deeper API-led integration with the provider in order to improve the experience or the product offering even more. That is when you'll need to decide what to shift on your existing roadmap, or even simply add this implementation to your queue for a later launch, while you keep going with your provider's out-of-the-box solution.

Regardless of which stage of the implementation you are at, your merchants will have access to flexible business financing on your platform, with a pricing that you approve of, and under your own terms. They will be able to buy stock and inventory, to advertise, to hire staff, refurbish premises and manage disruptions whenever they need to. Down the line, you can leverage integrations to make their application journey even faster, or include more data points in their credit assessment to be able to approve even higher numbers of applications. Win-win!

The merchant journey in 4 simple steps

Step 1: Merchant receives pre-qualified offers

To do so, your provider will request a set of anonymized data points to formulate pre-qualification offers that you can then share with the respective merchants via a marketing message or your own UI. Your third party embedded finance provider can provide strategic and creative support to execute marketing campaigns.

Step 2: Merchant applies for cash advance

It’s simple to onboard merchants with YouLend: they can fill out a simple application form in a handful of clicks, either prepopulated by information through your API integration, or hosted by YouLend in your own branding. All KYC and AML checks are done automatically in the background, keeping every funding compliant with the regulations relevant to the business owner.

Step 3: Merchant accepts offer

At this stage you can then offer a cash advance to your merchant in your own UI. Alternatively, the merchant can receive a firm offer from YouLend which is signed electronically.

Once agreed, YouLend will assign to the merchant a cash advance bank account. The underlying acquirer will pass the merchant's payouts through this account before they arrive in the merchant's day-to-day business bank account. This intermediate account will serve to manage automatic repayment of the cash advance in line with sales.

⭐YouLend will always pay out funds to the merchant's business bank account within hours⭐

Step 4: Merchant monitors repayments and reapply

Finally, you can retrieve cash advance information and present it in your own UI in your own YouLend partner dashboard. Or, the merchant can log in to their white-label dashboard which shows repayments.

Final tips: How to get started with embedded finance

When it comes to execution, many companies have realised that their talents are best spent on their core business. They are choosing to partner with specialists  to provide, as a service, the complex infrastructure and value chain required to run embedded finance at scale.

That’s because providers of embedded finance white-labelled solutions allow companies to more efficiently turn on and scale financial services capabilities using fewer internal resources. 

They handle all the fundamentals - such as back-end compliance requirements, bank partner negotiations, and infrastructure - so you can focus on creating tailored experiences for your customers. 

What’s more, your internal teams can gain deep insight by working alongside external experts who have a best practice methodology from deep experience implementing embedded finance. 

Launch financial services on your platform

Embedded finance is reshaping the distribution model for financial services while creating a new role for technology companies in the financial lives of consumers and merchants. 

Find out how to enhance your B2B customer experience by embedding financial services to in their journey.