The success of Buy Now, Pay Later (BNPL) cannot be underestimated. However, there is room for alternative solutions, such as the new project by Finastra. Referred to as Embedded Consumer Lending, it is an alternative payment option to BNPL and applies to higher-value purchases.
Embedded Consumer Lending Vs. BNPL
It is good to see financial service providers come up with new ways to make payments more feasible for consumers. Whereas BNPL is primarily unregulated and limited to purchases up to $2,000 – or 2,000 in other local currencies -the new solution by Finastra provides more flexibility. It is designed to apply to higher-value purchases and introduces traditional, regulated lending products to consumers while adhering to risk and compliance requirements.
Finastra’s Jeanette Kescenovitz adds:
“Historically, financial institutions have used our products to offer lending services direct to consumer. We have thousands of financial institutions in the US running on our software. Embedded finance has opened up a $7 trillion opportunity, shifting finance out of banks and into contextual channels consumers use on a daily basis.”
Although the name Embedded Consumer Lending – or ECL – doesn’t roll off the tongue like BNPL, it is a prominent solution. Customs gan access to a marketplace of merchants and distributors and ensure fees are kept as low as possible. Moreover, it is a scalable platform where financial institutions can find a new niche and scale up their activities as necessary.
The first bank jumping on board is Seattle Bank, with Loanstar Technologies being the distributor. The next objective is to onboard hundreds of merchants across the United States. Embedded lending is a key tool for banks and other institutions to expand their product reach while still benefiting customers who want to split their purchases into smaller payments.