Lending has always been a business built on risk and reward. But today, it's also all about experience. In a market where customer expectations are shaped by on-demand everything, how and when a borrower receives and repays their loan is just as critical as the loan itself.

That makes payments strategic and puts payment technology at the heart of lending operations. When you consider all that, it’s no surprise that embedded payments are emerging as the foundation of a new, more agile ‘lending stack’.

In this blog, we'll be looking at:

1. Why repayments are a battleground for lenders
2. How embedded payments strengthen the borrower relationship
3. The role of VRP in modern lending
4. Simplifying the payments stack
5. Operational gains lenders can’t afford to ignore
6. Embedded payments that work for lenders today

Why repayments are a battleground for lenders

Real-time loan disbursements get the headlines and are what matter most when your customers need funds, fast. They’re immediate, visible, and satisfy a powerful psychological need: the reassurance that “my money is here”.

Modulr helps lenders satisfy that need with direct access to near real-time payment tools such as Faster Payments and SEPA Instant payouts, underpinned by virtual cards and EMI accounts and a platform with 99.99% uptime, able to release approved funds in seconds.

Even so, the long-term value for lending businesses lies in repayments. Every one of these is an interaction; a chance to reinforce trust with your customers, maintain engagement, spot problems before they occur, lock in future payment success and optimise operations to reduce costs and drive efficiency.

And yet, this is where legacy systems often falter. With every repayment comes the opportunity for a payment to fail, a repayment date to be missed, or for administration to mount within the lender’s collection process.

Manual Direct Debit processes, delays in reconciliation and rigid repayment structures frustrate both borrowers and lenders. For those able to offer flexibility in repayments – whether that’s the method, frequency, amount, or timing and date – it can be a powerful differentiator that really matters to borrowers.

A fully capable payment and repayment service means lenders gain tools to reduce arrears, maintain compliance, and support borrowers through uncertainty – not to mention rich and immediate data on cash management, borrower behaviour and levels of risk.

That’s why lenders are looking to their payment capabilities as a service stack, taking notice of where they have such powerful tools, and where they are lacking critical capabilities.

How embedded payments strengthen the borrower relationship

Lenders can leverage embedded payments to take firm control over late repayments, failed collections and poor communication, all of which erode trust, even when a borrower is trying to stay on track.

With real-time data, lenders can proactively notify borrowers of upcoming due dates or instantly confirm successful transactions, build flexible scheduling, payment redundancy and fallback methods that offer borrowers convenience and control, reduce friction, minimise defaults, and improve satisfaction.

The business lender GAIN Credit slashed admin time by 75% and cut payment-related support calls to less than 1% by using Modulr for real-time disbursements. In a market where time is money, those numbers speak volumes.

And when repayments flow smoothly, so does support. Fewer inbound calls, clearer cash flow, and faster credit decisions make life easier for both borrower and lender. That’s true whether your business is in consumer lending, business lending or salary and wage advance.

Quick guide: How a full payments stack works in lending

• Disburse: Instantly send funds via Faster Payments or SEPA Instant

• Collect: Build upon unique accounts supporting a range of push and pull payment methods, including Bacs Direct Debit, Visa A2A, or Open Banking-powered Payment Initiation Services (PIS), Standing Orders and Sweeping VRP

• Reconcile: Use real-time webhooks and unique account sort codes and account numbers for accurate and efficient reconciliation

• Monitor: Receive instant notifications on payment status and exceptions

• Optimise: Automate retries, reporting, and borrower communications

The role of VRP in modern lending

Variable Recurring Payments are a payment technology considered by some as a replacement for Direct Debit, and a perfect method for loan repayment for the modern lender. The truth is less dramatic, but potentially much more exciting.

A VRP allows a user to connect their payments service provider to their bank account to make payments on their behalf, with improved control and transparency compare to other payment methods such as Standing Orders, Direct Debit or Continuous Payment Authority.

Sweeping VRPs use this connectivity to automatically move money from one account to another. While permitted use cases are limited and specifically restricted to two accounts with the same named owner, they include optimising savings and liquidity and repayment of certain lending products.

Potentially, this technology could help borrowers optimise how they finance and ultimately repay their loans. If regulation in the UK permits, the same technology would allow ‘non-sweeping’ payments into accounts for merchants and lenders, opening up a wider range of repayment use cases.

With these new secure, precise, instant payments for collections, lenders could see dramatically improved success rates for repayments and reductions in the delays associated with cards or Direct Debit. Payments would be settled instantly, card expiries avoided and payments confirmed instantly via API, while Strong Customer Authentication at setup would minimise fraud risk.

Simplifying the payments stack

New tools are required because as lending businesses evolve and grow, they face increasing complexity in managing payments in and out. Access to schemes, card issuance, account creation, orchestration and integration challenges can create operational burdens and the potential for costly delays above and beyond chasing any one late repayment.

A borrower experience underpinned by embedded payments might include:

• Verification of payee details using Confirmation of Payee, including any sanctions screening and fraud checks
• Account creation, with unique new accounts for borrowers to receive funds and use for supplier payments, or for repayments to be taken from
• Disbursement, often with instant release of approved funds via Faster Payments, SEPA Instant or virtual cards
• Collection, often via Direct Debit as a primary method but with potential support from multiple repayment options
• Real-time visibility on received payments via a borrower portal
• Automated retries on failed payments
• Notifications about missed or late repayments
• Adjustments to repayment schedules directly within an app or portal
• Automated reconciliation, providing real-time ledger updates and integration with reporting systems

With so many things to think about, it makes sense to seek a provider that can consolidate that stack into one streamlined operation, allowing the lender to concentrate on their business, not their payments stack.

Operational gains lenders can’t afford to ignore

Modulr orchestrates access to schemes and services through a single API, allowing lenders to embed disbursement and repayment functionality directly into their platform.

The SME lender Multifi shows how this works in practice. With Modulr embedded into its tech stack, Multifi reduced onboarding time for its borrowers from six weeks to 72 hours – helping them access much needed funding much more quickly.

“What Modulr does really well is plumb a lot of our key services together. It acts as that infrastructure for our customers to not just receive credit quickly and simply, but also handle their payouts within Multifi. We wouldn’t have been able to create this type of service without Modulr.”

Robert Keown-Boyd, CEO, Multifi

Payments infrastructure isn’t just a back-end concern. It directly impacts risk, cost, and compliance – and is central to operational efficiency.

Because Modulr is fully regulated by the Financial Conduct Authority (FCA) in the UK, lenders can move fast and trust that they’re building on secure, compliant, and scalable foundations.

Embedded payments that work for lenders today

It’s never been easier to borrow. But the real opportunity lies in making it easier to repay. With Modulr’s CollectionsHub, lenders can orchestrate every stage of repayment – from initiation through to fallback options – across multiple rails.

That means lenders or borrowers can manage their payments better, through:

• Instant account creation with dedicated IBANs or account numbers and sort codes
• Real-time visibility over incoming payments
• Flexible tools to adjust repayment frequency, value and method
• Repayment collection via Bacs Direct Debit, sweeping VRP or Open Banking-powered account-to-account PIS, with Visa A2A coming online in 2025
• Automated reconciliation with instant payment notifications matched to dedicated accounts
• Real-time exception identification
• Improved regulatory oversight through auditable workflows and secure access controls
• Reduced pressure on support teams through better borrower transparency and real-time updates

Lenders using Modulr's CollectionsHub can also automate retries using fallback rails – supplementing pull payments such as Direct Debit with push payment options such as Open Banking PIS – to reduce costs around failed collections and improve repayment certainty.

Modulr continues to be the forefront of Open Banking innovation, and as a founding member of Visa’s A2A working group, supports the new Visa A2A service enabling recurring payments via a single SCA. This offers an ongoing mandate for subscriptions, top-ups or billing, using Visa’s well established framework and proven, trusted technology to enable variable payment collections taken directly and instantly from bank accounts via Faster Payments.

Modulr’s CollectionsHub enables lenders to configure and orchestrate repayment journeys in one place – reducing arrears, streamlining operations, and unlocking better outcomes for borrowers.

What’s more, they can future-proof their payments stack through a single API – offering access to a wide range of payment methods, orchestration tools, initiation services, account creation, reconciliation and more.

Explore how to build smarter repayments for your lending business and speak to one of our team today.