Could P2P platforms benefit from embedded finance?



Peer-to-peer lending platforms are yet to tap into the embedded finance space, presenting a potentially lucrative opportunity.

The technology, which is predicted to become a multi-billion-dollar market by 2026, lets borrowers access finance from a fintech firm through a non-banking service such as an e-commerce platform.

Funding Circle signalled embedded finance as an important market when it exited retail P2P lending earlier this year and has launched APIs through Funding Options’ Funding Cloud embedded finance platform and through Capitalise.

Former P2P consumer lender turned digital bank Zopa has also expressed an interest in this area, while MarketFinance last month joined the Funding Cloud platform where it will offer its business loans, invoice finance and business-to-business buy-now-pay-later products.

Mukarrum Iqbal, head of strategic partnerships management for MarketFinance, said other alternative and P2P lenders should consider this area to boost originations.

“Customer experience is a key driver for business choices and embedding finance is a great way to offer greater convenience,” he told Peer2Peer Finance News.

“Non-financial companies can work with innovative fintechs to embed finance for customers at the point of need.

Read more: Yapily announces new embedded finance partnership

“We are currently working with partners to embed credit for business-to-business transactions at the point of sale and can see the commercial benefits of including this, such as increase in gross sales, average order values, and frequency of purchases.”

While a number of alternative and former P2P lenders have entered the embedded finance space, existing P2P players are yet to tap into this market. This may soon change, as industry stakeholders insist that it can increase much-needed access to funding for businesses.

“With embedded finance, businesses can access the financial services they need, when they need them, within the platforms and interfaces they use in the day-to-day flow of life and work,” Mikkel Velin, co-chief executive of YouLend – which provides funding for customers of Shopify and eBay – said.

“This is a huge advantage, as in order to increase financial inclusion and improve support for entrepreneurship, accessing finance should be simple and accessible.”

Analysis by Juniper Research claims the increased availability of APIs will help the market grow and exceed $138bn (£112.6bn) by 2026.