If you're a lender or a fintech that offers lending services to partners, you may want more efficient payments processing, but face one or more of these challenges:
Slow payout settlements. Borrowers may be waiting up to five business days before loans actually settle in their accounts, creating dissatisfaction amongst customers.
A lack of visibility on repayment collections. You need to manually check your accounts and bank statements to see if borrowers paid their loan on time. This can create problems with operational efficiency and cash flow.
Limited repayment methods. Your current payment options may not be suitable for all your borrowers – having more payment methods could give them more flexibility to repay you on time.
Manual disbursements and collections. Your current payment processing requires multiple steps, leading to human error, delays, and increased churn.
We sat down with our payment expert, Joe Boot, to show how Modulr can help you redesign your loan disbursement and collection processes so you can offer a better experience for you, your partners and borrowers.
In this article, we cover:
Contact us today to see how Modulr can help you create more efficient collections and disbursements.
How lenders can process payments with Modulr
We offer a full suite of payment products for lenders that you can embed directly in your platform all through a single RESTful API integration.
With Modulr, you can eliminate manual processes by enabling real-time automated API-driven loan disbursements and collections directly from your platform or via your partners’. This automation of real time payment capabilities enables you to serve borrowers quickly as you reduce the risk of manual errors that come with uploading batch files to your bank to payout loans or sifting through bank statements to see if borrowers have paid their monthly loan instalments.
Also, you can reconcile payments more easily and increase cash flow because borrowers can make loan repayments via multiple payment options, directly from your software.
Here's how you can transform your payment processing service with Modulr:
1. Set up payment accounts for automatic reconciliation
As a regulated electronic money institution, we can offer you an unlimited number of payment accounts you can use for disbursements and collections. If you’re offering this service to third parties, you can assign each partner a payment account.
To enable easier collections with automatic reconciliation, you or your partners can set up an individual payment account for each borrower where you can collect your loan repayments. Each payment account has its own account number and sort code or IBAN. This means you can automatically match borrowers’ inbound payments to make your reconciliation effortless.
2. Upload payment details and confirm bank details
You can upload recipients’ bank details and loan amounts directly to the payment account embedded in your software via our API.
To make sure funds go to the right recipient, you can use our Confirmation of Payee (CoP) service, which confirms a borrower’s bank details before you submit their loan payment. This ensures fewer bank detail errors from the very beginning.
3. Disburse and fund clients in seconds via an API
You can set disbursements to happen automatically when:
Your payment account has enough funds to cover your payouts
You set up rules for when to send the payment
For example, payments can go out as soon as you fund your payment account. Or you can establish a certain day of the week to pay out loans. Since our system is always on (we run 24/7, 365 days a year), you can disburse even on weekends.
We use the fastest payment schemes available – Faster Payments in the UK and SEPA Instant for Euro payments – so your disbursements can settle in near real time.
Depending on your business model, you can also disburse loans via physical or virtual cards you can issue directly from your software.
4. Enable borrowers to repay you more efficiently
With Modulr, you can have borrowers choose from a variety of payment methods to increase your collection rate, speed of loan repayment and borrower satisfaction. You can offer:
Traditional forms of payment, such as Bacs, CHAPS and Direct Debit
Euro payments like SEPA Instant and SEPA Credit Transfer
5. Receive automatic notifications of loan repayments
With Modulr, there’s no need to manually check loan repayments.
You can set up webhooks to receive instant notifications informing you when funds hit your accounts for real-time reporting.
Why choose Modulr as your lending payment processing solution?
We’re a regulated electronic money institution that’s been helping businesses bring their payment visions to life since 2015. As embedded payments experts, we know how legacy systems can hold back lenders (and fintechs offering lending services) from innovating their value proposition, offering a more efficient lending experience to borrowers, and scaling their businesses.
Automate outbound loan payments to save time, reduce workloads and fund borrowers instantly
Logging into your bank account, uploading a batch file, and manually keying in borrowers’ details adds time and administrative tasks to the entire disbursement process. You also risk file formats not matching those of your bank, which can create errors and further delays.
With Modulr, you can eliminate these manual steps and speed up your outbound processing to mere seconds.
Thanks to Modulr’s API and embedded infrastructure, you or your partners can create a payment account that enables you to send and receive payments. Then, you can instantly send the approved loan funds to multiple borrowers’ bank accounts automatically via our payment API.
All submitted disbursements will run on fast payment rails, like SEPA Instant and Faster Payments, so your borrowers can receive funds in seconds instead of days. And with our webhooks, you’ll know in real time when funds settle through the scheme so you can tell borrowers that the funds are already in their bank.
For example, the alternative payday lender GAIN Credit came to Modulr to innovate their payment process. They were relying on batch file uploads to send funds, which delivered a poor customer experience because of errors and delays.
With Modulr, the lender embedded our payment account infrastructure to issue approved loans via Faster Payments. Now, once a loan is approved, the lender can submit the payment automatically and instantly, allowing a borrower to receive funds within 90 seconds of their loan approval.
Offer loans via payment cards for greater control and higher customer retention
With Modulr, you can provide loan funds on prepaid or debit cards, enabling instant settlement. Modulr is a principal issuing member of Visa, enabling you to create branded virtual cards, attach them to a payment account, draw down on the funds in that account, and send cards to borrowers in seconds. We also handle payment processing and clearing, PCI compliance, and 3D Secure, so you only need one supplier for card management.
Not only can this payment method improve the borrower’s loan experience, but it can also increase customer retention and brand awareness as clients will remember your company every time they use the card.
Our payment cards also let you and your partners have greater control and visibility over how borrowers spend their loans. You can set card transaction restrictions and limit purchases to certain types of merchant IDs. You can also see each physical or electronic payment a borrower makes, giving you greater insights and global payment data to work with on how you can improve your lending services.
With Modulr, you or your partners can even issue branded physical cards to borrowers. Though not as immediate as virtual cards, physical cards can work for lending businesses with repeat borrowers.
Let’s take a B2B lender providing monthly credit to small to medium-sized enterprises (SMEs), as an example. They can issue each business a physical card they top up with the approved credit each month. The SMEs can then use the physical card for business and travel expenses, allowing them the flexibility to make purchases, whether they’re online, in the office or on the go.
Reduce fraud and protect your margins with built-in security
Just as the restrictions and settings you can place on cards can help you ensure borrowers spend their loans properly and avoid the fraudulent use of funds, Modulr also helps you minimise fraud in account-to-account payments.
Modulr is authorised and regulated by the FCA (UK) and De Nederlandsche Bank (EU), making our embedded payments platform compliant. We hold funds in the Bank of England for greater security and have a dedicated team that monitors all payment activity for suspected fraud.
As a Confirmation of Payee (CoP) service provider, we help you make sure loans go to the right recipients by checking the borrowers’ bank details before you actually send the payment. This way you’ll have less failed disbursements due to authorised push payment fraud or common mistakes, such as mistyped bank details. Borrowers can utilise this service when making repayments, so they can have greater trust that their loan repayments are going to the right recipients.
Read more about how our Confirmation of Payee service works and its benefits.
Make loan collections easier and faster by offering multiple payment options
With Modulr, you can make your service stickier by offering borrowers various repayment methods.
Here are just a few of the multiple payment solutions you can give clients with Modulr:
Direct debits. Offer UK borrowers the option to automate their loan repayments from the start to ensure a better collection rate. Since Modulr is directly connected to the Bacs scheme, we can offer you and your customers your own Service User Number (SUN). This allows greater transparency and trust as borrowers will see your company name on their transactions.
Account-to-account payments. Customers can use Faster Payments in the UK and SEPA Instant in Europe for loan repayments that settle instantly, so you can keep your cash flow healthy.
Open Banking payment initiation. Embed our Payment Initiation Service to make online payments easy and quick for borrowers in the UK, reduce errors, and have funds settle in your accounts in seconds. Our Open Banking works for both single and recurring payments.
For example, kennek offers multiple payment options via Modulr. Their lending partners each have their own SUN, so the borrowers who choose to pay via Direct Debit can do so more efficiently. Each borrower also has their own payment account so they can pay into them via Faster Payments, SEPA or CHAPS.
Learn more about how Modulr helps kennek end lending frustration.
Lower overhead costs by automating reconciliation
Manually processing inbound payments can be costly, especially if your volumes are high. If a lender has 10,000 borrowers, and they receive 10,000 repayments monthly, that’s a huge workload for even the best finance teams to handle and steep admin costs for you.
Instead, you can automate your entire reconciliation process with Modulr.
Each of your payment accounts comes with a dedicated account number and sort code or IBAN. You can create a payment account for each loan, so every time a repayment settles into its dedicated account you can automate reconciliation.
You can also set up webhooks on each account to automatically notify you when a payment arrives to track payments in real time. This tech can help avoid contacting the borrower by mistake for a missed payment. You can reduce customer service issues and increase borrower satisfaction with your services thanks to Modulr.
Our API-driven embedded payments system can facilitate reconciliation not just for traditional lending models but even for more complex and alternative lending solutions, like Liberis.
How Modulr helped Liberis innovate their collection and reconciliation (& reduce operational costs)
Liberis, a merchant cash advance provider, came to us because they needed help with payment reconciliation, which was manual and expensive to run.
Their repayment model is unique. Liberis gets paid by taking a percentage of a shop’s total card payments. This means merchants only pay based on their earnings and can gradually pay back their loan.
However, the high volume and particular use case made the lender’s reconciliation even more cumbersome and time consuming than standard lending models.
With Modulr, Liberis revolutionised their collection and reconciliation processes. Now, during onboarding, they issue each merchant a payment account where card funds settle into. Then, by establishing split payment rules via our API, they automatically divide the funds, sweep their percentage into their own payment account and move the remaining funds into the merchant’s external bank account.
Modulr’s embedded account infrastructure and automatic rules-based logic simplified Liberis’ complex collection workflow and automated their reconciliation. The best part? Thanks to Modulr, Liberis reduced operational costs by 35%.
Choose Modulr to help you disburse and collect loans more efficiently
Lender payments processing no longer has to be slow, clunky, manual or costly. With Modulr, you can overhaul your disbursements and collections to satisfy your partners and borrowers, get paid faster and more efficiently, and scale your business quickly.
Contact us today to discover how we can help you innovate your loan payment processing.