One of the best ways to make targeted financial offers to customers is exactly where they already are. For payment processors or facilitators (PayFacs), that means the opportunity to expand the range of embedded finance offerings within existing processing platforms. 

The result — a payment processing service encompassing a range of consumers’ and businesses’ financial needs — promises a seamless finance experience for merchants and all players involved in the financial value chain. 

At Blankfactor, we’re helping to build this next generation of smart payment facilitator platforms with embedded finance at the core. Learn more about how we’re supporting one global processor in leading the way with developing innovative embedded lending use cases, enabling sub-merchants to access working capital loans. 

The growing market for embedded lending use cases 

Embedded finance is transforming how consumers and businesses access financial services, including embedded lending solutions. 

Leading firms in payments and beyond are starting to capture the value, building merchant growth capital and embedded lending solutions within digital platforms, from e-commerce to payment processing. 

  • Stripe Capital: Since Stripe Capital launched in 2019, the fintech has been offering flexible lending solutions to businesses within the Stripe platform. Stripe benefits not only through increased revenue and loan fees, but also through increased platform engagement. 
  • Shopify: Shopify Capital enables its commerce platform users and business owners to access loans through its merchant cash advance offering. With over $4.5 billion in funding to date, Shopify is using data gathered from its Capital program to power insights for Shopify Credit. (PYMNTS)  

And for small businesses (SMBs) increasingly looking for easy access to cash and other financial services, the benefit is mutual, with both consumers and merchants increasingly turning to these lending services. The global market for cash advances is expected to grow at a CAGR of 6.6% between 2023 and 2032, reaching $138.5 billion by 2032, according to the latest data from Allied Market Research. 

The project vision: Seamless sub-merchant embedded lending

Our client, a leading global payment processor, understood the value potential. They approached us with a vision to bring working capital loan solutions to their payment facilitator platform for sub-merchants and partners. Partners on the platform provide services to sub-merchants operating under the clients’ umbrella.

The new embedded finance feature would allow sub-merchants fast and simple access to working capital loans based on their payment processing history within the client’s platform. A third party will provide the loans, a lending provider partnering with our client and a card processor.

With financing directly integrated within the platform, it’s far more convenient for small businesses to access loans. There’s no extensive paperwork required, as expected by a bank. Partners on the platform also benefit when merchants take loans, as they receive a percentage of the loan fees.

Building the Merchant Cash Advance widget

Bringing working capital loans to payment processing is an innovative offering for a payment processor, and it would require deep financial technology expertise. With our payments experts’ deep understanding of complex platforms, we’ve been the ideal partner for the client to bring embedded finance capabilities into their platform.

Our team’s goal was to integrate the Merchant Cash Advance widget embedded in the client’s platform to display loan offers and enable merchants to access financing easily. The embedded lending offering would be built based on data from merchant transactions. 

Working from UX mockups developed by the client’s team, we’re bringing them to life with custom UI development and integration with the client’s backend infrastructure. The widget will allow merchants seamless access to:

  • See details of loan offers based on their payment history.
  • Select loan amounts up to the offered limits.
  • Review repayment terms set by the lender.
  • Instantly accept offers and have funds deposited.
  • Partners will also have a view to see reporting on loan uptake across their sub-merchants.

The initial version is serving as an MVP to get the embedded finance functionality up and running. After going live in January, our team will look to expand on the offering, potentially enabling loan payback directly within the platform. Other possible development areas include a reporting and analytics functionality for both partners to have an overview of the merchant’s loans accepted, paid, in progress, and other data.

Benefits of embedded working capital solutions

An embedded lending solution takes merchants and SMBs one step closer to an all-in-one business finance solution within the transaction ecosystem. The benefits include:

  • Seamless application: Merchants don’t need to bring documentation to a lender and submit a detailed application. They can automatically qualify for loans based on transaction history, sales volume, and other business data tracked within the processing platform. 
  • Flexible loan product selection: Merchants can choose to accept the loan, modify the loan amount before accepting the offer, or reject the loan, granting flexibility based on their business needs.
  • Built-in repayment: With a fixed percentage-based repayment structure, merchants can pay back loans automatically through their future transactions.  
  • Fast access to financing options: Improving cash flow is just a few clicks away.

For our PayFac client and their lending partner, there’s a range of expected benefits. An enhanced processing platform with extensive value-added services means:

  • New revenue growth: In addition to transaction processing fees, merchant loans will generate new revenue for our client and its partners. These include loan origination fees and as well as repayment fees. 
  • Increased customer engagement and loyalty: Merchants are likely to increase their platform usage if they have access to additional financial services they need, like business lending. 
  • Increased platform partners and sub-merchants: An innovative payment processing platform with high merchant engagement and revenue opportunities is likely to see long-term growth among platform partners and sub-merchants.

Key project details

We’re proud to deliver innovative fintech products and functionalities to our client partners. Offering embedded financial services signals what’s possible in the future of payment platforms, and our client is leading the way with the help of Blankfactor’s payments experts.

With a lean team including three developers, a DevOps engineer, a technical architect, a business analyst, and an interaction designer, the project exemplified Blankfactor’s approach to engineering and delivery. 

  • Deep partnership: We work closely with clients to truly understand their business and technology landscape and deliver a product in line with their specifications. 
  • Innovation: Bringing embedded finance into a payment facilitator platform is not yet common in the industry. Our team brings a creative mindset to complex challenges. 
  • Technical mastery: Our skilled developers and architects take on intricate integrations.
  • Lasting value: We build products and enhance existing systems to help drive increased growth over the long term. 

Get future-proof payments solutions

Embedded finance represents an enormous opportunity for payment facilitators to expand their value proposition to merchants. By integrating accessible working capital solutions into existing platforms, companies like our client are paving the way for the future of payments.

As consumer demand for embedded financial services accelerates, we expect to see more payment platforms follow suit in exploring embedded lending services. Companies that move quickly to enable these offerings will have a competitive edge in merchant acquisition and retention. 

At Blankfactor, we’re technology builders helping industry giants lead with the next generation of innovative payments solutions. From embedded finance offerings to resilient payments to GenAI innovation in payments, we understand how to architect future-proof solutions that drive business outcomes — fast. Book a 60-minute strategy session today to get the custom solutions you need to move your business forward.