Finastra has opened up avenues to traditional regulated lending options for consumers directly from the point-of-sale (POS) with its latest embedded consumer lending solution.
The financial software company’s new offering looks more toward high-value purchases and approaches as an alternative to buy now pay later (BNPL), which isn’t always applicable to purchases of higher vales.
For end consumers, it provides access to the most attractive lending deals within the convenience of the POS; at a time when the cost of living crisis continues to stretch the wallets of many.
A recent report released by the Financial Conduct Authority (FCA), found that, in the UK, the total value of BNPL transactions doubled between 2020 and 2021, topping £5.7billion ($6.88billion), while App Radar found that money management apps gained six million new users within the first six months of this year.
For merchants, the banking-as-a-service (BaaS) platform provides access to numerous lenders and their specific products, allowing checkouts to be streamlined with more accessible loan applications.
For distributors, it levels access to loan capital by integrating lending front-end with financial institutions, while bringing financial institutions closer to distributors and merchants to distribute their banking products.
Jeannette Kescenovitz, the company’s senior director of solution management, BaaS and orchestration, describes the solution as “a direct route to growth” and one that will “build connectivity” within every level of the embedded lending process.
Josh Williams, EVP, chief banking officer at Seattle Bank, one of the company’s partners, confirmed these comments, stating that the BaaS was “a vital component” of the Bank’s alternative financing strategy and that embedding loans at the POS establishes “a new channel to provide financing to customers we couldn’t have reached before.”
Finastra’s embedded consumer lending exposes APIs on its FusionFabric.cloud open platform with which third-party distributors may integrate.
One such distributor to integrate with the company’s solution is Loanstar Technologies, which offers technology to connect lenders to borrowers, creating POS consumer loans through their merchant network in numerous verticals.
The distributor’s CEO Andrew Turner said that the integration will allow it to “scale up significantly,” and that it would “help us connect with the right bank providers to bring billions of dollars of new liquidity to fund POS loans with our merchant customers.”
Integrated with Finastra’s lending and origination core systems and hosted on Microsoft Azure, the solution enables financial institutions to process POS loan applications, including performing identity verification, decisioning, facilitating e-sign, as well as account creation and funding (through the bank’s core banking system).
Using APIs and event notification systems, third-party distributors can provide real-time feedback to merchants and consumers on loan status.