Buy Now Pay Later (BNPL) products have gained popularity among consumers in recent years primarily because of the speed and convenience they offer. Nevertheless, they are not without their own set of challenges.

For instance, integrating BNPL into brick-and-mortar stores can be a complex and time-consuming task, given that physical stores employ a myriad of third-party software and hardware providers at their checkout. This integration tends to be tedious, expensive, and extensive. And for this reason, many entrants preferred the path of less resistance—online—where there still may be a dose of integration, but it is more minimal.

However, embedded lending, which has emerged as a prominent topic of discussion in the world of finance and retail, offers a potential solution to BNPL’s in-store checkout problems. Let’s dive deeper.

A note on BNPL vs. embedded lending

BNPL is a short-term financing solution that provides customers with Pay in 3 or Pay in 4 options, usually with no interest. Even though this might sound like a good opportunity for consumers, it can lead to untraceable debt since many BNPL providers accept loan requests at the point of sale (POS) without reporting or conducting credit checks.

As a result, this concern has sparked a growing demand for fair and responsible products from regulated financial institutions, which is where embedded lending technology comes into play. It enables banks and lenders to deploy their loan products at the POS, seamlessly embedded within the buyer’s journey. Moreover, it gives both individuals and businesses easy access to the right financial options that are specific to their needs, such as installment loans, lines of credit, split pay, and business-to-business (B2B) payment plans.

The types of loans supported by embedded lending programs tend to cater to larger ticket items and are repayable over a longer period of time. As in-store purchases tend to be of higher value than online orders, these types of bank loans are a good fit for in-store transactions.

Last but not least, embedded lending is not limited to specific use cases. It can be deployed across various industries for essential products and services, such as healthcare, essential appliances, professional courses, events, and so on. In contrast, BNPL is mainly used for online retail purchases such as electronics, clothing, fashion accessories, and furniture.

Why is implementing embedded lending in brick-and-mortar stores easier?

Embedded lending technology, first and foremost, takes into account the ability to embed within existing systems, dedicating time and resources when building its infrastructure to pre-integrate with as many terminals and POS systems as possible. The fact that embedded lending solution providers focus on technological enablement, as opposed to the lending itself, means that they are able to build a superior set of technological tools.

Regulated banks and lenders can leverage various technological tools for seamless integration. For example, in online channels, they can utilize e-commerce platform plugins. For in-store interactions, the customer journey can be streamlined while providing a ‘business-as-usual’ process for the merchant, using tools such as virtual cards, digital wallet web provisioning, and QR code payments.

This flexibility and robustness enables banks and lenders to embed their loans across any customer channel—online, in-store, in a health provider’s clinic or a contractor’s office, call centers, or at home.

By giving customers a convenient financing experience across channels, an embedded lending platform can enable financial institutions to grow their loan revenues, reach new customers where they already are, and remain competitive in today’s ever-changing lending and payment landscape.

Summing up

Although BNPL has solidified itself as the chosen method of payment for millions of consumers, it has limitations in terms of streamlining its offerings across multiple channels and tailoring payment options to individual customers and use cases. Embedded lending technology tackles these issues and more, as it integrates the unmatched financing capabilities of banks into any merchant POS. This flexibility allows banks and lenders to seamlessly provide their loan products at the POS, whether online or in-store, while also providing customers financing options that align with their unique needs.

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