More Than A Feature: Why Offering Embedded Loans Is A Strategic Move To Increase Customer Value
Embedded finance is reshaping how customers interact with financial services. With the incorporation of point-of-sale credit and in-app payments, it’s clear that the lending sector has embraced this technology. For SaaS platforms, marketplaces and fintechs, embedded loans can offer a powerful opportunity.
Incorporating embedded finance into your platform isn’t just another feature, it’s a strategic move.
By offering integrated lending options, platforms can potentially strengthen customer relationships, boost revenue and position themselves as trusted growth partners.
What Are Embedded Loans?
“Embedded finance” refers to lending products integrated directly into a non-bank platform, effectively providing financial services through an API.
Instead of redirecting customers to a bank or third-party site, non-financial platforms and businesses integrate financial services seamlessly within the platform they’re already using.
Think of an e-commerce marketplace that enables small businesses to access working capital when restocking. This is a practical example of an embedded finance solution in action.
With this infrastructure, non-financial companies and platforms don’t need to obtain a credit licence or manage compliance.
Instead, they connect to a licensed lending provider via an API-first model. The lender handles the loan origination process and legal and reputational risk, while the platform provides the front-end experience.
This is in stark contrast with traditional financial institutions, where businesses must leave their platform environment and deal with typically slow, external processes. Embedded finance keeps customers where they are, making finance faster, easier and more relevant.
Why Embedded Loans Are Gaining Traction in Australia
Australia is seeing a surge in embedded lending that’s expected to continue through 2029. This isn’t surprising, as SMEs continue to look for ways to simplify operations while accessing faster funding options.
The regulatory environment also plays a role. ASIC’s responsible lending framework and ATO reporting obligations clarify how lending activity should be structured.
Platforms don’t want to carry the weight of becoming licensed lenders, but they do want to offer customers more financial solutions. Embedded finance offers the best of both worlds: value creation without compliance headaches.
Access to funding can make or break SMEs’ growth plans. Obtaining a loan directly inside the platforms they already rely on can potentially save time, reduce friction and support long-term loyalty.
Benefits Of Embedded Loans For Platform Partners
Offering embedded finance capabilities can potentially open up powerful opportunities for platform partners beyond basic credit. It can also drive everyone closer to financial inclusion.
Increased Customer Value
By offering embedded financial tools, platforms can provide real, tangible value. Customers no longer need to leave the environment they trust to access financing options.
This convenience can potentially increase engagement and lead to greater sales.
New Revenue Streams
Platforms can monetise lending without holding credit risk. Revenue-sharing arrangements with lenders mean that every loan facilitated through the platform can generate additional income.
This is a scalable way to boost margins and gain new customers for SaaS providers and marketplaces.
Competitive Differentiation
With thousands of SaaS tools and digital platforms competing for attention, standing out may be difficult. Embedded finance can provide a unique differentiator.
A platform that helps customers grow financially and access credit through financial partners may be in a better position compared to one that doesn’t.
Improved Customer Loyalty
Embedded loans are sticky, once a customer experiences the convenience of in-platform finance, they may be less likely to switch to a competitor.
How Embedded Loans Work In Practice
The success of embedding financial services comes down to API-first infrastructure. Here’s how the process typically works:
- Customer request: A small business seeks credit while using a SaaS or marketplace platform.
- API connection: The request is sent to a licensed lender through the platform’s API connection.
- Decisioning: The lender uses real-time data to make fast credit decisions.
- Funding: Once approved, the funds will typically be disbursed quickly, all while the customer remains within the platform.
The compliance and credit risk sit with the lender, not the platform. An example of embedded finance compliance in action is financial and identification data from a customer sent directly to the licensed financial institution through the API.
This arrangement lets platforms focus on delivering customer value while leaving the regulatory-heavy lifting to the financial service providers.
Compliance And Risk Management
Compliance is a top concern for Australian businesses, particularly when dealing with financial services.
The good news for platform partners is that embedded financial services handle these issues through structured partnerships.
- Responsible lending obligations: Licensed lenders comply with the requirements of ASIC’s National Consumer Credit Protection (NCCP) Act.
- Tax reporting: Under ATO rules, financial transactions must be reported accurately. Working with a compliant lending partner can ensure this obligation is met.
- Privacy and data sharing: With Australia’s Consumer Data Right (CDR) and Open Banking frameworks, the customer’s data is protected while enabling secure, permissioned sharing.
By outsourcing the regulatory side to embedded finance providers, platforms can potentially expand their offerings without the burden of becoming financial institutions.
Commercial Models That Work For Platform Partners
Embedded finance can be structured to fit different business models. Many embedded finance providers typically offer different services, from embedded banking as a service to embedded insurance.
Flexibility in commercial models can be crucial for whichever financial products a platform wants to integrate. Some common models include:
- Revenue share: The platform earns a percentage of each loan facilitated.
- White-label solutions: The loan is presented under the platform’s brand while the lender operates in the background.
- Transaction-based fees: The platform earns fees per funded transaction.
Platform partners may want to consider prioritising flexibility. A SaaS platform may prefer recurring revenue from revenue share, while a marketplace might lean towards transaction-based fees.
The right model will typically depend on customer expectations and business strategy.
The Strategic Advantage: Future Of Embedded Loans In Australia
Looking ahead, embedded finance will only grow in importance. Open Finance and its interconnected financial systems will continue to improve real-time data access, enabling faster decision-making.
SMEs may increasingly expect their digital platforms to offer financial services as part of the package, which allows potential customers to easily access small business loans and other financial products.
For Australian SaaS platforms, fintechs and digital marketplaces, adopting embedded finance now can provide a first-mover advantage. By embedding lending into the customer journey, platforms can potentially build stronger, longer-lasting relationships and secure their place as industry leaders.
Conclusion
Embedded finance is more than just another product, it’s a strategic move to increase customer value, loyalty and revenue.
For Australian platforms, it represents an opportunity to meet customer needs faster and more conveniently.
By choosing the right embedded finance partner, SaaS businesses and marketplaces can deliver flexible, compliant, API-first solutions that scale with their growth.
Ready to explore how embedded finance can transform your platform? Reach out to Lumi to learn how we can help you deliver scalable lending infrastructure that drives customer growth.
