How we help … lenders 

Modulr By Modulr on 28 March 2023   •   5 mins read

Whether business or consumer, lending has gone through enormous change over the last half-decade. Few industries live or die by their ability to quickly and accurately disburse and collect funds in a customer-first way as much as lending does. And that’s on top of enormous regulatory changes and the increasing ability of fraudsters. What if, instead, you could offer instant pay-outs with the security of Confirmation of Payee, flexible collection options and automated reconciliation? What if you could harness API power to make your offering faster, safer and easier, while delivering the customer experience your borrowers need as well? 

Here’s what Modulr can do for the lending industry.

It’s challenging out there

The entire financial services industry is going through disruption and evolution, and lending is no exception. Especially with the impact of economic pressures like rising energy prices and the cost of living. In addition, historic issues around responsible lending and regulatory clampdowns have led to an erosion of trust and reputation, as well as costly customer complaints. Compounding this challenging and competitive environment is the fact that nowadays, tech-savvy borrowers have ever higher expectations. They want their loan application experience to be as friction-free and intuitive as their last (and best) retail experience.

Lenders are realising that they need to evolve and innovate, not only to make their proposition more appealing but also to keep up with this accelerating pace of digital adoption. They’re under pressure to approve applications and disburse loans quickly, but traditional payment processes are slow and inefficient. Many disbursement processes are still triggered by spreadsheet file uploads to traditional banks; a process which is prone to error, fraught with insecurities and fulfilled far slower than today’s customers expect. While the flow of inbound investor funds and borrower repayments make payment consolidation unnecessarily difficult and time-consuming. These factors, together with a limited range of methods to issue funds and collect payments, result in a lending experience that’s decidedly below par. 

Why embedded payments are the answer

Embedded payments are the enablers of innovative lending propositions. Embedding payments into lending workflows not only makes processes much more efficient and reduces operational cost but can deliver a measurable competitive advantage. 

Embedded payments are fully integrated, seamless, invisible and instant payments supporting rather than obstructing the business flows they have been designed for. For this to work in practice, embedded payments are based on rich APIs making the underlying payment systems accessible through a single point of integration and with a degree of flexibility that has not been seen before. At the same time, embedded payments offer a separation of the user journey from the underlying processing of a payment. This ensures that lenders who leverage embedded payments will keep their clients fully engaged with their brand experience. 

How Modulr can lend some embedded payments power to your proposition 

Modulr's embedded payments platform makes it easy for lending companies to pay out loans instantly across payment methods of their choice; to build trust by removing manual processes and costly errors; and to ensure reliable and regular collections of payments from their customers.  That’s because, we’re one of the few non-bank payment service providers (PSPs) to have direct access to the Bank of England and the UK payment schemes, with no third party in between. We package up this payment scheme access together with our regulatory permissions and bespoke payments infrastructure to enable lenders to quickly and easily embed payments directly into their technology and brand, and deliver exciting new services.

With Modulr, lenders and borrowers can enjoy instant loan disbursal, 24 hours a day, 365 days a year. With 99% of payments fulfilled within 90 seconds thanks to our participation in the UK Faster Payments scheme and the EU’s SEPA Instant. By offering real time loan approvals and payments in this way, lenders can reduce, if not eliminate, any customer complaints about the speed of service.

Our multiple loan disbursement and collection methods provide lenders with a variety of payment options to suit all borrower needs. Loans can be issued via physical or virtual cards with pre-set limits to track usage, allowing lenders to limit spending to specific purchases and earn revenue through interchange. Repayments can be collected easily and efficiently, directly from the revenue source (e.g. acquirers), while flexible solutions make it easy to alter payment amounts and collection days. Direct Debits allow for variable scheduled repayments and lenders can use our Open Banking Payments to reduce their reliance on expensive card payments which typically charge a percentage per transaction. Borrowers can instead be sent a link with prepopulated details for a fast, user-friendly experience.

Leveraging our EMI licence, lenders can create unlimited and unique borrower accounts, within seconds, for unrivalled loan disbursement and streamlined payment reconciliation. What’s more, we can automate key stages of the payment process, so there’s no need for error-prone manual exports or file uploads!

Payment innovations such as Confirmation of Payee can be used to verify recipients’ account details, reducing the likelihood of fraud and the cost and overhead of fraud checking, while minimising the risk of disbursements going to incorrect accounts.

All in all, as far as lending goes, it’s a game-changing solution 

So, in the highly competitive lending market where differentiation is key, Modulr enables lenders to deliver a truly first-class solution. Manual error-prone, time-consuming payments processing and reconciliation are replaced with real-time, automated and digital processes. By removing historical operational inefficiencies, we help lenders to reduce costs and give them the capacity to redirect their resources and time elsewhere. With our one-stop, full-stack solution, there's no complex coordination between multiple partners, instead lenders can leverage our existing relationships and API-first technology to go further and grow faster.

So, if you're a lender and you want to find out more about the embedded payments potential and what it could mean for your business, download our free guide today.