Just 37% of Consumer Lenders Connect at eCommerce Checkout

Despite the clear potential of integrating credit directly into commerce platforms, many lenders appear to be sitting on the sidelines, potentially missing significant growth opportunities in the burgeoning embedded lending market.

Embedded lending describes credit tools integrated directly into a merchant or provider’s platform, allowing borrowers to apply for credit, such as new credit cards, installment plans or buy now, pay later (BNPL) services, at the point of sale to pay for a product or service. Embedded lending is a subset of the broader embedded finance landscape. A new report, titled “Embedded Lending: From the Lender’s Perspective,” commissioned by Visa and conducted by PYMNTS, explores this market from the lender’s viewpoint, examining how and to whom embedded lending is offered and associated challenges. The research is based on a 2024 survey of 361 lenders across Australia, Germany, India, Japan, the United Kingdom and the United States.

The research reveals a significant gap between the market opportunity and the lending industry’s current engagement and interest levels. Lenders across major global economies have begun offering embedded lending, making lending products a streamlined part of payments. However, the typical lender serving consumers or small to medium-sized businesses (SMBs) has not fully embraced its potential for attracting customers and accessing new market segments. Nearly half of lenders serving SMBs have not yet entered this space.

The report suggests many lenders underestimate the impact embedded lending could have on market shares and profitability. Only about 1 in 5 lender respondents express strong interest in launching new embedded lending products in the next two years. A key obstacle identified is the relatively low adoption of integrations with external platforms like marketplaces or in-store point-of-sale systems, which are crucial for reaching new customers.

Key data points from the report highlight the current state of the market:

SMBs are often overlooked: Most lenders offering embedded lending prioritize individual consumers over SMBs. Across the six markets surveyed, 83% of lenders offer embedded lending products to consumers, compared to just 55% for SMBs. This imbalance holds true in five of the six countries studied.

Lukewarm innovation interest: Overall lender interest in innovating new embedded lending products is notably low. Among lenders serving consumers, only 22% are very or extremely interested in offering new embedded products in the next two years, with a similar 22% expressing high interest among those lending to SMBs.

Underutilized integrations: Lenders widely underutilize external platform integrations. Across the surveyed markets, only 58% of lenders that lend to individual consumers have at least one third-party platform integration, such as with an eCommerce platform, and just 64% of those serving SMBs do. For consumer lending, only 37% of embedded lenders have integrated with eCommerce platforms at checkout.

Beyond these findings, the report also delves into regional variations in embedded lending provision and innovation interest. It identifies specific challenges cited by lenders not currently offering embedded lending, such as technology integration, operational issues and risk management, noting that these challenges vary by country. The research also highlights specific embedded lending products that lenders not currently offering them are interested in adopting, including embedded personal loans for consumers and embedded microloans for SMBs.