Exploring the Impact of Embedded Finance on Employer-Based Lending and Buy Now, Pay Later Services

Embedded finance involves integrating financial tools and services into non-financial platforms and is a rapidly evolving field within fintech. As technology continues to evolve and reshape the financial industry, the emergence of embedded finance is transforming traditional lending and payment methods and can help to make them more accessible to a wider audience.

Employer-Based Lending

Beyond consumer applications, there is growing recognition among HR professionals of the value of financial wellness benefits. Kashable enables employers to provide meaningful support for their employees' financial wellness goals by integrating embedded finance into their existing HR and benefits programs. This approach simplifies the process of delivering low-cost loans to employees and streamlines loan repayment through payroll.

As a socially responsible financial wellness program, Kashable offers employees access to financial tools and services that were previously inaccessible through traditional lenders or credit providers. Kashable's comprehensive financial wellness program encompasses a range of offerings, including access to low-cost loans, free credit monitoring, live financial coaching, savings accounts, and a financial literacy library. These resources empower employees to take control of their financial wellness, initiate saving habits, and build their credit profiles.

Kashable’s services provide an expansion to traditional benefits packages and can be an alternative to hardship withdrawals from 401(k)s to help deal with emergency expenses. A recent study found that hardship withdrawals hit an all-time high in 2022, indicating the need for alternative options.?

Buy Now, Pay Later

Buy Now, Pay Later (BNPL) is gaining traction as a popular payment option in the fintech industry as it allows consumers to finance their purchases in installments at the point of sale. Due to its ease of use, accessibility, and popularity with both consumers and merchants, we expect BNPL to continue growing as a mainstream payment method.?

By combining consumer products with financial products, embedded finance creates a convenient situation for businesses and consumers. Nowadays, embedded finance integrates with rideshare apps, online shopping, and many delivery services. In e-commerce, it allows payments to be processed, or financing to be approved automatically via BNPL without the need for traditional banks or lenders. As a result, embedded finance facilitates a seamless redirection from the retail site to a third-party financing institution that uses limited consumer information to make a near-instant lending decision.?

A recent Consumer Reports survey found that between January and August 2022, the number of Americans who reported using BNPL rose from 18% to 28%. Beyond simple financing, many BNPL platforms are expanding to include other products and services, such as rewards programs, special marketing campaigns run in concert with retailers, and increasingly, entry level credit card?offerings. These expanded offerings make BNPL an attractive option for consumers who may not be eligible for traditional credit or banking options. They also provide benefits to retailers, who see increases in sales when payment options are simplified and streamlined - one study estimates average sales increased by 30-50%. Given the expanding popularity of BNPL, we expect to see it offered more often alongside traditional credit card providers and diverse retailers.??

Despite the popularity of BNPL, concerns exist about the potential harm it may cause to the customers who overextend themselves by taking on multiple loans and risking delinquencies. One study found that of consumers who used BNPL, 57% said the option caused them to spend beyond their means. Despite this, 62% of BNPL users still believe their use of the service will continue to increase.?

The ease of use and integration of numerous financial services into consumers' everyday online experience is changing the landscape of e-commerce. It offers alternatives to traditional banking and institutions. These changes expand the opportunities for access to credit and lending services– an important step on the path to wealth equity.?

Embedded finance is a rapidly expanding sector that hit $20 billion in revenue in 2022 and is expected to double in the next three to five years. Beyond embedded payments and financing, offerings such as embedded insurance and branded payment cards are becoming more common. An expansion in lending and payment method options are indicating growth in areas such as investment, compliance, and human capital. As the world of fintech evolves along with the needs and demands of consumers, Kashable provides valuable tools for employees to help them strengthen their financial wellness.?