Payments lie at the intersection of commerce and the ever-expanding digital economy. For the Payment Service Providers (PSPs) that ply their trade in this dynamic space, there’s a unique opportunity to create new revenue streams and increase merchant retention: diversification.  

By partnering with an embedded finance platform, PSPs can go beyond facilitating payments by inserting tailored financing solutions into their technology ecosystem expeditiously. This ability to embed lending options into the payment process benefits both the PSP which enhances its offering and the merchant which can access flexible finance at the point of need.   

To understand why PSPs should partner with embedded finance platforms in greater detail, let’s explore key elements of this relationship: why tailored financing solutions are important for PSPs; why they should partner with an embedded finance platform; and what they should consider when partnering with a platform.  

The importance of tailored financing solutions for PSPs

To leverage their unique position in the financial ecosystem and the connections they make there, proactive PSPs gain a holistic understanding of their customers’ financial needs before seamlessly integrating value-added services that meet them. They recognise that their role in helping merchants accept payments presents an opportunity to offer them a frictionless, digital-first lending experience at the point of sale. 

PSPs that possess the foresight and agility to diversify their service gain a competitive advantage in an increasingly saturated market – boosting merchant retention rates. Unlike much of the competition, which still relies on payment services alone, these forward-thinking providers augment their offering with tailored financing solutions that complement and expand their service – not to mention their revenue stream.  

Meanwhile, their merchants gain frictionless access to vital finance at the point of need from a brand they trust, improving their cash flow management – and removing any interaction with a bank or other lender. These traditional financial institutions typically rely on antiquated systems, labour-intensive legacy processes and narrow credit-decision criteria. This rigid lending framework poses an existential threat to SMEs, which are prevented from accessing capital because they’re considered too risky or face convoluted application and assessment processes amid a time-critical need for capital. 

The benefits of partnering with an embedded finance platform

While it’s possible for a PSP to build a lending solution in-house, the challenges soon mount up – from the cost to the time to market. Embedded finance providers possess the technical know-how required to integrate creative lending solutions into their partners’ end experiences quickly, efficiently, and cost-effectively – and the benefits are compelling: alignment of goals and objectives, expedites the time to market, regulatory compliance, reduces costs, ongoing development and support, and eliminates opportunity cost. 

Embedded finance platforms empower PSPs to insert lending solutions into their technology ecosystem through the development of customisable APIs. These dynamic software interfaces can be tailored to meet their merchants’ needs – maintaining brand integrity and differentiating their payments experience from single-service competitors.  

With an embedded finance provider in their corner, PSPs can leverage their position by offering fast and flexible funding options to their merchants alongside payments, such as revenue-based financing: this allows SMEs to access funding based on their overall business revenue, not just their credit score. The result is a tailored and frictionless lending experience that allows merchants to focus on using the funds, rather than applying for them. 

Considerations for PSPs when partnering with an embedded finance platform

PSPs must not integrate financing solutions into their technology ecosystem for the sake of it – a short-sighted approach that will leave them lacking direction and unable to meet the merchants’ needs. Yes, the benefits of augmenting their offering with financing solutions are enticing, but success will be an uphill battle without the support of an embedded finance platform that aligns with their goals.  

A thorough vendor selection process will match the PSP with a platform they can trust from a security, technical, reputational, and strategic perspective. By carefully considering the options available and making an informed decision, they can forge a meaningful partnership that recognises this is a long-term investment. 

With both parties aligned, it’s time to give the merchants what they want. But what is that exactly? New financing solutions must be underpinned by data that sheds light on the merchant’s specific needs and preferences – otherwise, they will be rudderless. An embedded finance platform can look beyond traditional data sources by harnessing AI-powered personalisation – allowing them to recommend products and services based on insightful metrics.  

This insight allows PSPs to enhance the merchant’s experience by anticipating their expectations and collaborating with their embedded finance partner to give them tailored financing solutions when they need them most – increasing their lifetime value. 

Conclusion

Viewed through the lens of diversification, tailored financing solutions present an opportunity for forward-thinking PSPs to pivot from being myopic single-service providers to a customer-centric source of dynamic financial services. Aware that their customers are tired of being viewed as a commodity by traditional lenders that offer generic products and services; they can mirror the highly personal and frictionless experiences offered elsewhere online. 

To reap the associated rewards – such as competitive advantage, increased revenue, and improved merchant retention – PSPs must look beyond their business. Digital transformations conducted in-house are often fraught with roadblocks – from escalating costs and project delays to regulatory hurdles. Partnering with an embedded finance platform that aligns with their goals and objectives empowers PSPs to diversify their service expeditiously by providing seamless lending options that align with their customers’ needs.  

Partner with us

Meet your merchants’ unique funding requirements by partnering with an embedded finance platform that can deliver the highly personal and frictionless experience they crave.