How lenders can drive growth and efficiency with Modulr

Modulr By Modulr on 5 January 2024   •   5 mins read

Lenders, did you know you can get a lot more out of payments than you currently do? If you’re finding that processes are slow and you can’t offer the borrower experience you want, embedded payments can help, while driving growth and efficiency. 

Through Modulr’s embedded payments, lenders can offer…   

  • Multiple loan disbursement and collection methods 
  • Instant 24/7/365 loan disbursements 
  • Confirmation of Payee fraud checks 

… with help from Modulr’s:

  • Access to UK and European payment schemes 
  • Open banking architecture
  • Virtual and Physical Cards 

So, how does Modulr do it? Below we outline some of the typical obstacles faced by lenders today, before explaining how embedded payments unlock new opportunities for revenue and growth. 

The challenges lenders face today

Limited collection options

Lenders want to collect repayments in varying ways that both suit the borrower and manage risk. Multiple collection methods give lenders more certainty on receiving repayments on time as they can meet the needs of different borrowers - helping reduce default risk and manage costs associated with chasing late payments. 

For example, some lenders may want the regularity and control of repayments by Direct Debit. Others may prefer a more agile solution that makes it easy to collect payment directly from the borrowers’ revenue source. It’s about providing what makes most sense for their business and their customer base. 

However, lenders are often limited by what their banking partner offers them. In attempting to meet these varying expectations, many lenders find themselves managing a complex and costly ecosystem of suppliers.

Slow payout speeds and inflexible methods creating a poor borrower experience

When a borrower wants a loan, they want it fast. Making approved loans available quickly is a core lending requirement. However, many lenders find themselves unable to payout funds in the quick timeframe borrowers want.  

This has nothing to do with their service or tech, but the legacy technology and systems they’re often bound to by their bank. Even if their bank is offering Faster Payments, many banks will still only process payments in batches, meaning significant delays. Lenders have to work around cut-off times and ‘business hours only’, which leads to high levels of customer enquiries asking when they will receive their loan – something lenders can’t accurately answer. 

They are also often limited in how they make these payouts. For some customer types, having the loan preloaded on a card is hugely advantageous, but it’s not something the lenders’ payment infrastructure can handle.

Wasting time and money with intensive manual processes

With traditional payment services, paying out loans involves a lot of manual data entry. The time spent downloading and uploading payment files to banking portals, and painstakingly checking for errors, is time that could be spent on other areas of business.  

Then there’s the issue of reconciliation. Keeping track of repayments is often a headache, with lenders needing to manually check accounts and bank statements to see if borrowers repaid on time. This creates problems with operational efficiency and cash flow. 

Modulr's key benefits

Modulr’s regulated, software-driven embedded payment services offer lenders something different. Removing longstanding pain points, while boosting growth and operational efficiency.  

Alternative, default-reducing collection options

Modulr can boost the number of collection options lenders provide.  Both modern and traditional payment rails can be offered, including Bacs, Direct Debit, CHAPS and Faster Payments in the UK, and SEPA Credit Transfer and SEPA Instant across Europe.  

Lenders can also benefit from Open Banking’s Payment Initiation to proactively address late payments. This enhances the overall efficiency of the lending process, while ensuring a smoother and more reliable cash flow.  

But these alternative options are not all about flexibility and efficiency. Modulr can create named borrower accounts to collect payments directly from the borrower’s revenue source. This substantially reduces the possibility of the borrower defaulting on their loan, and enables the lender to feel secure in lending to more businesses.  

As for confidential invoice discounting, Modulr’s named borrower accounts give lenders the ability to receive repayment immediately after the invoice is paid to their borrower. This gives them far more security in their operation and prevents them from chasing their borrower to repay the loan once the invoice has been fulfilled.  

Optimised payout

Modulr has direct access to real-time payment rails such as Faster Payments in the UK and SEPA Instant in the EU. This means loans can be issued instantly and received by the borrower within seconds, 24/7/365.  We also enable loans to be paid out in innovative new ways, such as via digital wallets and virtual or physical cards, supporting a wide array of borrower use cases. 

This revolutionises the lending experience, making everything faster and more borrower friendly. This can be a key differentiator that rapidly boosts growth.  

Automated processing

With Modulr, lenders can eliminate manual processes by enabling real-time automated API-driven loan disbursements and collections, directly from their platform. This automation of real time payment capabilities enables them to serve borrowers quickly and reduce the risk of manual errors that come with uploading batch files to a bank to payout loans.  While our Confirmation of Payee (CoP) service can be used to automatically confirm a borrower’s bank details before a loan is paid out. This ensures fewer errors from the very beginning. 

Lenders can also set up individual accounts for each borrower where they can collect loan repayments. This enables easier collections and automatic reconciliation. No more sifting through bank statements to see if borrowers have paid their monthly loan instalments. Instead, your team can focus on growing the business efficiently.  

Unlock new opportunities with Modulr 

By partnering with Modulr, lenders can find profits in the place they’ve never looked – payments.  

Core to Modulr’s success is our robust platform, ability to operate at scale, and multiple connections to payments schemes. We’re also one of the few non-banks to have direct access to the Bank of England. This is all underpinned by our regulatory status as an Electronic Money Institution (EMI) in the UK by the Financial Conduct Authority and in Europe by De Nederlandsche Bank.   

Today, Modulr handles over £100bn of annualised payment volume and the platform handles on average 30 API calls per second and has an uptime of 99.99%.   

We call this Payments Unleashed.   

So, if you’d like to use embedded payments to drive your growth and efficiency, visit our solutions page for lenders here. 

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