EMBEDDED LENDING MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2024-2031)

Embedded Lending Market Size and Trends

The embedded lending market is estimated to be valued at USD 6.35 Bn in 2024 and is expected to reach USD 23.31 Bn by 2031, growing at a compound annual growth rate (CAGR) of 20.4% from 2024 to 2031.

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Embedded lending allows borrowers to apply for loans through the platforms of other businesses. There is growing demand for embedded lending services as more companies integrate financial products and services into their digital customer experiences. Non-bank companies are partnering with lenders to provide customers instant credit approval and access to funds. Additionally, the ease of use and seamless experience embedded lending provides is increasing its popularity among digital-first consumers. Furthermore, technological advancements aiding its seamless integration and rising adoption across industry verticals are expected to drive the embedded lending market growth in the coming years.

Rising Digital Adoption and Mobile Connectivity

With digital technology advancing rapidly in recent years, people's lives have become increasingly online-based and mobile-centered. Activities like banking, shopping, communication, and entertainment that once required physical presence now happen primarily through mobile apps and websites. This shift towards digital and online has opened up new avenues for businesses to provide services and reach customers. Embedded lending allows financial institutions to offer loans, payments and other services seamlessly integrated within the online platforms, marketplaces and apps that people frequent in their daily lives. As more economic activities move to digital spaces driven by growing smartphone usage and internet penetration, embedded lending ensures financial access keeps up with the pace of digital transformation in a seamless manner.

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The increasing preference of consumers for seamless and customized financing solutions integrated within product purchase flows is a major factor propelling the embedded lending market forward. Customers want the convenience of getting pre-qualified loan decisions in real-time and ability to complete the loan and purchase in a single online transaction. This consumer behavior is encouraging businesses across sectors like retail, auto, real estate, etc. to embed financing solutions into their purchase experience.

Companies are able to boost sales and customer satisfaction by offering instant credit approvals and flexible repayment plans customized to individual needs and budgets. For example, buy-now-pay-later services embedded on e-commerce platforms saw a rise in usage from 52 million users in 2020 to over 100 million users in 2022 according to the World Payments Report 2022 by the World Bank. Consumers found value in dividing large purchases into interest-free monthly installments. Businesses gained by converting more browsing customers into buyers.

This rising preference for embedded buying and instant financing among digital-savvy customers is set to increase going forward. More sectors will look to capitalize on the opportunity by collaborating with lending firms to provide personalized and automated credit approval and disbursement. Technologies facilitating fast underwriting using alternative data sources will further boost embedded lending. Both customers and businesses stand to benefit from the seamless purchase experiences and sales conversions this market enables.