Embedded lending refers to financial lending offered by non-financial institutions.
For example, Apple recently announced the launch of Apple Pay Later, a BNPL service that lets customers split the cost of any purchase into four installments.
Interest in embedded lending is growing because it enables any company to access a secure infrastructure for lending and immediately start offering financing for customers.
Currently, the most popular form of embedded lending is BNPL.
BNPL transaction volumes hit $120B last year, making it one of the fastest-growing segments within the consumer finance industry.
But embedded lending is also becoming popular in a B2B setting, specifically in the form of offering SMBs faster access to capital.
Merchant cash advances, working capital term loans and revenue-based financing are emerging as B2B embedded financing solutions.
Embedded lending is part of the Embedded Finance meta trend.
Search volume for “embedded finance” has grown by 566% over the last 24 months.
Some VCs describe embedded finance as essentially “making every company a fintech company.”
A growing number of startups are now offering embedded finance solutions, further accelerating this trend.
Highnote, Weavr and BharatX are examples of startups offering similar solutions.
Embedded investment, embedded insurance and embedded payments are examples of trending embedded finance tools.
Embedded finance is likely to become more mainstream, considering it is on track to become a $7T industry by 2030.