Embedded finance
Embedded finance
Platform enterprises
Platform enterprises

Improving the funding application journey for merchants with integrated embedded finance

The journey to securing business funding for merchants through traditional platforms is very manual and outdated. Integrated embedded finance offers a way to improve the experience for both businesses and providers with automated application processes.

What are the pain points for merchants in the funding application journey?

According to a recent SME survey, 56% of credit applications are abandoned by small businesses because they are too long or difficult to complete. From a digital transformation standpoint, SME financial services are gravely overlooked, despite small businesses comprising of 90% of the business population. Understanding embedded finance and the products it enables provide a valuable route forward.

Overall, the onboarding and funding process is outdated and fragmented, and it takes a very long time for SMEs to get approved for financing. Without integrated embedded finance solutions, banks and platforms have no choice but to subject applicants to a lengthy application process. When we consider the reasons for this colossal drop off rate, several pain points for traditional lenders become clear.

SalesCycle, 2022

Asking too much information and long applications are the biggest reasons why applicants abandon requests for financing. Additionally, 72% of previously rejected borrowers say they’re reluctant to apply for new loans. Given that many merchants today are relatively young, and traditional lenders tend to rely on revenue reports and credit history to approve loans, that means a potentially significant number of viable merchants are being rejected at the point of application, and it’s likely they won’t come back.

This is all assuming that potential borrowers aren’t put off making an application at the very first phase of the process: looking for a good deal with affordable interest rates. Given that the Bank of England has recently risen interest rates to 3%—the biggest hike in 33 years—it’s all the more likely that merchants will abandon their application journey before it has even begun. This is taking a significant toll not only on their businesses, but on the economy as a whole. Integrated embedded finance offers a solution by improving the application on all fronts, right from the start.

What does a good funding application journey look like?

Given the number of applicants that abandon their financing journey before completion, it’s clear that the complex, cumbersome processes used by so many traditional lenders is in dire need of a product upgrade. To achieve this, it’s important to understand what a truly seamless application journey could look like:

Open Banking

Since PSD2 legislation came into effect in 2018, sharing financial data between banks and third parties has become a simple process. An integrated embedded finance provider can use Open Banking APIs to share and retrieve data and they’re able to process relevant information with minimum of input from the applicant. Applicants can instantly connect their bank account to Open Banking and safely share upto 24 hour months of credit history with the finance provider, making for a smoother journey from start to finish. According to YouLend data, merchants who use open banking are 60% more likely to instantly receive an instant approval decision than those who supply bank statement PDFs.

“My funding application with YouLend was so quick and easy. You don’t need to be technologically savvy or submit any additional documentation to use open banking.” - Small Business Owner, Hospitality Sector

Digital Documentation

Verifying documentation is necessary but can slow down the funding application process as most credit applications from banks require physical documentation with manual verification processes. However, embedded finance providers can provide digital portal where applicants can upload pictures directly via Strong Customer Authentication (SCA) and facilitate the secure sharing of documentation. According to research by Plaid, average application time drops from 8 minutes to 3 minutes for those who use open banking documentation checks.


With integrated embedded finance, platforms can provide a truly seamless experience that is fully branded and embedded into their own site. Platforms can now make the whole application journey transparent and display all the information in one place—starting with documentation, credit decisioning and self-selection of offers. 

Alternative Data

Where traditional lenders rely on a small set of data points to assess funding applications, integrated embedded finance allows platforms to outsource the process to third parties operating under a different regulatory regime. This means merchants who don’t have a long credit history or years of revenue reports can use alternative data points—such as online reviews or social media presence—to support their applications. Using alternative data as part of the assessment journey, platforms can assess risk more effectively, reject fewer viable applicants, and enjoy their repeated business in the future.

Instant Decisions

As well as alternative data, integrated embedded finance uses automated underwriting to assess loans, meaning platforms can reliably approve an application in minutes rather than days or weeks. Since 43% of SMEs say speed is a crucial factor for them in applying for a loan, this is a significant way to improve the customer journey.

Final thoughts: Integrated embedded finance introduces a tech-first application journey

In a nutshell, integrated embedded finance solutions help platforms and banks offer merchants all the above in their application journey. YouLend's case study with Plaid talks about a "A tech-first approach to SME financing" and is supported by a complete funding journey from our partner, ThinkRich. It outlines how merchants can go through a no-docs application experience to obtain the funding they need to grow their business.

For more on how to integrate embedded finance into your platform, and offer merchants a best-in-class funding application journey that will keep them coming back, book a demo today.

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