Embedded lending is all about the future of credit.
As such, it has opportunities and challenges, even in developed markets like the United States. The PYMNTS Intelligence report “The Embedded Lending Opportunity: U.S. Edition,” commissioned by Visa, found that 17% of consumers and 16% of businesses have used embedded lending platforms over the past 90 days, accessing credit directly through a merchant or service provider’s platform.
While the model is promising, it faces hurdles that lenders must overcome to maximize its potential.
The promise and challenge were top of mind for Shane Holdaway, global head of card products at Visa, in a conversation with Karen Webster. Holdaway said lenders must carefully navigate risks, regulatory demands, and evolving customer expectations to succeed.
Case in point: Embedded lending has become attractive to consumers and small businesses grappling with unpredictable cash flows. According to the report, 33% of U.S. consumers with unstable cash flows used embedded lending in the last 90 days, and 26% of small businesses with similarly volatile financial situations used it in the past year. These numbers underscore a growing appetite for flexible lending solutions that can address real-time financial needs without the friction associated with traditional loan products.
“For many small businesses, cash flow is a constant balancing act,” Holdaway said. “Embedded lending allows them to address those mismatches between inflows and outflows in real time. That’s the promise of embedded lending — it’s about being there when a business needs to cover an unexpected expense or seize an opportunity, right at the point of purchase.”