Embedded Lending Is Checkout’s New Growth Engine

Watch more: The Embedded Lending Shift: From Trend to Infrastructure

Embedded lending can be a key driver for merchants seeking to enhance sales momentum across channels, but they need sophisticated infrastructure that enables sender coordination and optimized approvals for every credit profile.

Meidad Sharon, founder and CEO of ChargeAfter, told PYMNTS as part of the “Summer School” series that multi-lender networks, waterfall financing and real-time decisioning are reshaping the financing experience at checkout.

“Merchants are looking for a solution that would enable their consumers to be approved, so they want to cover the full credit spectrum to have choice [for consumers],” who, for example “might prefer the clarity of installments.” The optionality is important no matter if the consumer is interacting with the merchant in-store or online.

Navigating a Fragmented Market

But a significant challenge within the current point-of-sale financing landscape is its inherent disconnection. Sharon highlighted the pain points, indicating that “there are great lenders out there — each one focusing on their specific area. But the problem is that each one of them is providing part of the puzzle, meaning that they can’t solve all the needs of merchants, or all the needs of the consumer.”

He elaborated: “Each lender is focusing on a specific credit box: Prime, near prime or subprime, but only one credit box, which leads to approval rate that is usually between 30% to 50% … So there are consumers that are left behind.”

Lenders often specialize in a singular financial product, such as private label credit cards (PLCC), installment loans (long-term or short-term like BNPL) or leasing products, and typically focus on specific geographical territories, preventing a truly comprehensive solution for merchants.

This fragmented market directly contrasts with evolving consumer expectations. Today’s consumers anticipate the same real-time, personalized and choice-driven experience at the point of sale that they encounter in other purchasing scenarios at the moment of need.

ChargeAfter’s Vision: Streamlining Integration

For merchants, implementing embedded lending solutions can prove daunting amid the complexity of integration. Merchants ideally seek to minimize the time and energy invested in such processes.

ChargeAfter directly addresses that complexity by offering a unified integration across all channels and striving for the simplest possible integration method for merchants.

“ChargeAfter, for example, is embedded in all the leading shopping carts and leading point of sale system,” Sharon told PYMNTS. “And if the merchant is using one of those, then typically it’s only downloading the plugin [or the solution]; Inherently, it will be available within the platform.”

For merchants with homegrown systems or point-of-sale systems not directly connected, ChargeAfter provides a suite of application programming interfaces (APIs) and software development kits (SDKs) for integration.

The streamlined connectivity underpins ChargeAfter’s goal: to establish itself as what Sharon termed “the Visa of instant credit.”

Transforming Verticals and the Role of AI

Embedded lending is particularly impactful in specific verticals where purchases are substantial and often unanticipated. Sharon identified classic sectors benefiting significantly from point-of-sale financing, including furniture, electronics, home improvement and elective medical procedures. Within these high average order value environments, merchants are increasingly sophisticated in their use of credit.

The home improvement sector stands out as a large and growing vertical with unique financing requirements. Transactions in this industry frequently occur in the home, often with contractors leveraging financing to complete renovation projects and “expand on the original purchase, because I see new needs to my projects — as well as the ability to confirm the purchase when I finish the project.”

Looking ahead, artificial intelligence (AI) is poised to play an increasingly integral role across all industries, and embedded lending is no exception. Sharon firmly believes that AI is indispensable for efficiency and quality across various operational aspects.

“Any embedded lending company that won’t use AI first as an efficiency tool for their development teams, in their marketing teams, in their product teams will be out of business in the near future,” Sharon said.

Beyond internal efficiencies, AI is expected to become fundamental on the product level, enhancing customer support, data analysis and overall consumer experience. ChargeAfter is actively integrating more AI capabilities into its products, “and this will be something that will differentiate our solution from the competition,” he said.

“Credit is shifting to the point of sale,” Sharon told PYMNTS “with the ability to have real-time origination and the ability to use credit afterward — that’s going to change the credit industry … and that’s very exciting.”

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