Let’s explore the concept of Buy Now Pay Later and go over its benefits for both consumers and businesses. From better margins for the business owner to increased customer satisfaction, this payment model has proven to be a game-changer for product and services providers worldwide. And it’s just getting started. 

But first, wanted to check if you (or your staff) would like to get the ultimate BNPL automation white paper for B2C and B2B companies?

What is Buy Now Pay Later? 

Buy Now Pay Later is payment model that lets consumers to pay for a product or a service in installments over time and get the purchase upfront. This simple credit product eliminates the need for immediate full payment and provides flexibility to consumers. On the other hand, business owners who offer Buy Now Pay Later improve their margins, customer loyalty, and overcome income seasonality.

What is Buy Now Pay Later?

Buy Now Pay Later is a payment model that lets consumers pay for a product or a service in installments over time and get the purchase upfront. This simple credit product eliminates the need for immediate full payment and provides flexibility to consumers. On the other hand, business owners who offer Buy Now Pay Later improve their margins, customer loyalty, and overcome income seasonality.   

How does Buy Now Pay Later work? 

Both product and service providers can offer Buy Now Pay Later payment options. To implement it into your business, you will need to decide between the two common options.  

1. Running the program in-house to control the customer’s lifecycle, BNPL terms and approvals. This is what TurnKey Pay Later platform lets you do. 
2. Partnering with financing providers like Affirm, Klarna or specialized lenders to fully delegate BNPL to a third-party and receive the full purchase sum at once. 

Once your BNPL solution is in-place, the client selects this payment option at the checkout and splits their purchase amount into smaller payments, usually charged automatically bi-weekly or monthly until repayment.  

Businesses that use third-party financing providers have little control over the financing terms and whether the client will be approved. And after the purchase is complete, the business owner loses control over customer relations.  

To be able to create new BNPL campaigns and offer accessible terms tailored to your clients, you’d need to run your Buy Now Pay Later operation in-house. Which is what we specialize in.  

Here is a demo of what your own pay later operation may look like with the TurnKey Lender Platform. 

Benefits of Buy Now Pay Later for consumers 

With the rise of BNPL finance providers like Affirm or Klarna and heavyhitters like PayPal and Apple entering the arena, it is evident that customers want and use these services.  

Lower interest rates  

One of the key benefits for consumers is the availability of zero-interest installment plans. Many Buy Now Pay Later services offer interest-free payment options if customers repay the installments within a specified period. This eliminates the burden of accruing interest charges, making it an attractive alternative to traditional credit card payments.  

BNPL can help improve your credit score  

Buy Now Pay Later services can also help consumers build or improve their credit scores. When customers make regular, timely payments on their installments, it demonstrates responsible financial behavior. Positive payment history can contribute to an improved credit score, opening doors to better credit opportunities in the future. 

This is one of the things Esusu does with TurnKey Lender platform by reporting timely rent payments to credit bureaus and allowing renters to pay off large charges over time.

Spread large sums over time 

Last but not least, the whole point of the pay later phenomenon is to not have to pay all the money at once. While this applies most for individuals living paycheck to paycheck, Buy Now Pay Later provides a way to manage large expenses and cashflow without involving the bank. By spreading the cost of a purchase over several installments, consumers can avoid financial strain and budget more effectively. This flexibility allows them to make necessary purchases without having to wait for their next paycheck or having to liquidate assets.  

Benefits of Buy Now Pay Later for businesses 

According to Klarna, Implementing a pay later program leads to 41% increase in average order value, 35% increase in conversion, and a 45% higher purchase frequency. 

And it’s not just the retailers and electronics stores who need to take notice. 71% of Americans who visit the dentist frequently would use BNPL over traditional payment methods. And 86% of pet owners would choose BNPL in place of traditional payment methods to help pay for future vet costs. 

As a business, it’s important that you promote responsible use of credit products. At the same time, you will be protected from unreliable clients by the decisioning system inside your lending platform. 

Increased average order value  

Implementing Buy Now Pay Later services often leads to an increase in average order value. When customers have the option to spread payments over time, they are more likely to make larger purchases which look more affordable. Businesses can capitalize on this by strategically promoting the benefits of installment plans, boosting sales, revenue, and combating income seasonality. 

Here’s a story of a furniture provider that successfully offers rent-to-own and leasing payment options in Florida.  

TurnKey Lender Customer Success Story: Rent-to-own/Leasing Automation for Own it 4 Less

Improved customer retention and satisfaction  

Offering Buy Now Pay Later options enhances customer satisfaction by providing greater purchasing power and flexibility. It caters to customers who prefer to make purchases without immediately depleting their funds. By providing this payment alternative, businesses can attract more customers and foster long-term relationships. 

Provide financing to customers without third parties 

Traditionally, businesses have relied on third-party financing options, such as banks, to offer installment plans to customers. Buy Now Pay Later services eliminate the need for intermediaries, allowing businesses to build stronger direct relations with their clients. This streamlines the process, reduces costs, and simplifies the customer experience. 

What businesses can offer Buy Now Pay Later 

Each day new businesses start offering flexible payment options to their clients and the BNPL phenomenon has moved far beyond the traditional lending and shows how democratized credit has become. Here are some of the business types that can benefit significantly from offering flexible payment options.  

1. Physical and online retail: Stores and e-commerce platforms offering a wide range of products that allow customers to finance their purchases. 
2. Home improvement financing: Businesses that provide financing options for home improvement projects, including renovations, repairs, and installations. 
3. Healthcare financing: Medical clinics, cosmetic procedures, dental offices, and healthcare facilities offering financing solutions for procedures, treatments, and medical services.
4. Consulting and legal: Professional service providers, such as consulting firms and law firms, that offer financing options for their services. 
5. Fitness equipment: Companies selling exercise equipment and fitness accessories that allow customers to finance their purchases. 
6. Wedding services: Wedding planners, venues, photographers, caterers, and other vendors in the wedding industry offering financing options for couples planning their special day. 
7. Travel and hospitality: Travel agencies, hotels, and vacation rental providers that offer BNPL options for booking flights, accommodations, and vacation packages. 
8. Education and training: Institutions, schools, and training centers that provide educational programs, courses, and certifications with financing options available. 
9. Automotive industry: Car dealerships, auto repair shops, and rental services that allow customers to finance their vehicle purchases or repair expenses. 

These are just the business verticals we see enter BNPL space most commonly, but every week we see new examples of innovative ways to embed lending into business operations.  

Why keep BNPL in-house as a product or service provider 

When working with third-party finance providers, your customers may often face unreasonable interest rates, inflexible repayment terms, and arbitrary financing denials which you won’t have any control over. These factors are likely to dissuade the client from business with you.  

At TurnKey Lender we’ve worked with businesses who offer pay later options around the globe and their reasons for keeping buy now pay later in-house include the following. 

The money stays in your business 

When you delegate your pay later program to a third-party lender, you make less money on each sale, and you give up  control over the customer data and lifecycle. This way you let the BNPL lenders reap all the rewards for your hard work and investments. When you are in control, any fees, upsells, and future business with the client are yours. 

You control the whole customer journey  

If you’re offering a pay later option, you need to be able to effectively manage it without taking on additional risks or overhead. By having control over the customer journey, businesses can optimize financing automation, streamlining operations and delivering efficient service. Having control is essential for better financing automation and a superior customer experience. 

It’s easier to grow revenue 

As a product or service provider, you share your business with someone else when you give the customer past sale to a third-party lender. You share the margin on each sale, you give up control over the customer data and lifecycle past the sale. Which isn’t perfect for the business owner that did all the work to make the sale just to hand the client over to the lender instead of keeping them and continuing this relationship yourself.  

Offering Buy Now Pay Later options on your products or services with TurnKey Lender 

To outperform one’s industry peers in financing terms and user experience, one-size-fits-all solutiond aren’t good enough. Businesses need an intuitive and configurable platform that allows offering the pay later option at checkout on your terms. TurnKey Lender does just that with a fully independent infrastructure tailored to businesses’ exact requirements.  

With TurnKey Pay Later, businesses can offer a digital pay later experience that exceeds what Affirm and PayPal provide, while being personalized for your clients.  

You will have control over program terms, promotions, approvals, and rollovers, allowing for customization and improved customer experience. The platform combines automation and instant analysis of borrower data, ensuring efficient and seamless transactions.  

Effortlessly adjust details of your pay later program, run the system on autopilot or manually control who gets approved and on what terms. Once the system is in place and running, it’s highly automated so you can save as much as you can on staff and paperwork. 

 Where are we and where is it headed 

Digital lending technology is becoming more and more accessible, lowering the industry entry barrier and making it possible for any business owner to offer BNPL plans to their clients.  

At one point not so long ago, just accepting card payments was innovative for a business. Then, tap-and-go came around, further simplifying payments. Now, BNPL options become another standard because of the benefits they brings both sides of the transaction.  

As BNPL continues to evolve, it’s becoming an integral part of the lending landscape, shaping the way people and businesses make purchases. Powered by the business benefits, growing audience familiarity, and the accessibility of the lending technology, the pay later phenomenon is only starting its march with plenty of the marketplace still underserved for a little while longer.

The Standard Edition is an end-to-end lending infrastructure that comes built-in with all the modules, calculations, and features most businesses will need to start, run, and scale their lending operations.  

To simplify the process for clients in various business domains, separate editions of TurnKey Lender are tailored to the needs of different lenders including: 

• Traditional creditors 

Banks and credit unions 

• Embedded lenders 

Equipment manufacturers, retailers, medical professionals, auto dealers, etc. 

• Alternative lenders  

Microfinance, digital, P2P lenders 

For businesses that need custom and unique lending processes automation, there is the Transformer Edition, a custom solution with a set of extra flexible and powerful bank-grade tools capable of automating lending flows and decision logics of any complexity. 

You can download a full-size white paper about TurnKey Lender Standard’s capabilities or keep on reading to get a quick look. 

TurnKey Lender Standard Features Overview – How the Platform Works 

TurnKey Lender is an integrated platform with dedicated permission-based workplaces that have features tailored to the needs of different types of users that interact with or work in a lending business. 

Loan Origination for flexible application processing

The Loan Origination Workspace in TurnKey Lender includes the functionality for loan application creation, terms and schedule management, as well as bank and contact details collection. The fully configurable loan application process allows for creation of custom application flows, dictionaries, and loan offers, as well as supports disclaimers and document templates management.  

As is necessary for the lending space, loan origination in TurnKey Lender ties in natively with Underwriting and Credit Decisions, transferring data between the workplaces and other employees.  This allows for one to make accurate loan decisions powered by AI instantly where other software providers still require manual analysis and requires days of work time on each application.    

Underwriting for instant risk evaluation and borrower analysis

The Underwriting Workspace of TurnKey Lender includes functionality for in-depth risk scoring, borrower evaluation, decision rules checks, loan agreement generation, loan offer management, and more. This workplace is designed in an intuitive way to present the maximum amount of credit scoring data on a single screen and to allow underwriters to make informed loan decisions in a matter of seconds.  

TurnKey Lender then aggregates all the data your instance has access to internally and through integrations to come up with a single creditworthiness metric that lenders can see at the very top of their workspace. Applications can be assigned to employees, moved back to Origination, commented on, and analyzed in every possible detail by the employee.  

TurnKey Lender’s award-winning Decision Engine uses self-learning algorithms and deep neural networks to process both alternative and conventional risk assessment data and make a fully automatic loan decision or to provide an underwriting specialist with the in-depth analysis results at a glance.  This allows lenders to streamline and fully automate their credit processing and achieve almost instant loan decisions.  

Intuitive Collateral Management for accurate and timely management of various assets   

If your business works with secured loans, your TurnKey Lender Standard Edition will come with a fully functional Collateral workplace where all the operations with collateral assets are carried out in.   

The Collateral Officer in charge of the loan application can:  

• Evaluate new collateral assets  
• Reevaluate existing collateral assets  
• Add and create documents about the collateral asset both as a staff member and as a borrower  
• Edit existing collateral assets  
• Delete collateral assets

Loan Servicing for Loan management the way it’s meant to be done 

The Loan Servicing module in TurnKey Lender encompasses all the activities related to loan management post loan approval. Loan managers or servicing officers use this module to manage loans’ schedules, charge installments manually, implement loan modifications, rollovers, grace periods, restructure loans, communicate to borrowers directly from the dashboard, and more.  

 Automated Loan Collection Alleviating Headaches of a lender  

The Debt collection module allows for efficient management of loans’ collections with AI-driven collection priority, delinquency buckets, configurable collection strategies, and conversation scripts.  

Collections is another workplace where we apply our proprietary AI. In this workplace, the machine learning algorithms learn to evaluate the borrower base of a lender and evaluate the collectability of each loan to help the staff pursue the right approaches with each borrower.  

In-depth yet clear reporting for all your lending analytics needs   

The Reports Module analyzes, formats, and presents insights from all the business-related data across the TurnKey Lender system. Reports are presented in the form of easy-to-understand graphs and dynamic dashboards which can be quickly updated or formatted differently depending on the current business need.  

Lenders can also create fully custom reports in the built-in Reports builder which uses hundreds of smart markers to pull any type of operation’s data lender might need for their stakeholders or internal analytics. 

Borrower Portal to make sure your borrowers have a quality digital experience with you  

Borrowers get a digital end-to end experience that provides an exceptional and perfect lending interaction. . The digital workspace provides borrowers  with a fully digital web (or mobile) app where they can manage their personal and payment details, apply for new loans, make repayments, and keep track of all the lending-related information. 

Optional: Vendor Portal 

As businesses must move their operations online to remain competitive, more and more SMEs are considering launching an in-house financing program for their vendors, merchants, and partners. Vendor financing with TurnKey Lender allows businesses to add a new sophisticated monetization source for a business to be able to build more meaningful relations with clients and partners through affordable and easy-to-use credit. 

Through the vendor portal a business owner can now offer in-house financing and other credit products to vendors directly. This functionality is created to provide the freedom to finance vendors and separate stores without involving any middlemen.  

Optional: Peer-to-Peer (P2P) Module (with Investor Portal) 

If you’re operating  a peer-to-peer lending business , you will get the Peer-to-Peer Module in your TurnKey Lender Standard Edition. . This workplace provides the functionality sufficient to manage investors and investments, funds collection and deposits, loan bidding, and more.  

The P2P Investor Portal provides investors in a lending platform with a fully functional web cabinet where they can bid on loans, manage investment opportunities and account details, as well as track current and past investments.   

 From the side of the borrower/investor/vendor, they get an easy-to-use application flow and a dedicated Borrower Portal/Vendor portal or Investor portal respectively. All of the credit checks, application processing, pre-qualification, KYC, documentation are done on full autopilot with employees nonetheless being able to get involved or change the automatic flow the way they see fit in any given business scenario. 

In an overview, here’s what a standard loan’s lifecycle looks like in a digital end to end solution: 

And as you can see, TurnKey Lender includes a digital experience for all parts of a lending experience.   

[download] 

Features that Resonate  and Make TurnKey Lender Stand Out

• A powerful Calculations Engine to create and manage credit products of any complexity 

No matter the needs of a lender (be it an alternative lender, a retailer, a telecom, or a revolutionary FinTech startup, etc.), the Calculations Engine can easily create credit products that address these needs specifically. This is achieved with help of numerous calculation approaches that come built-in the solution. The entire process of creating and launching new credit products takes a minute or less. Similar changes take lenders with hard-coded systems months.

Once published, credit products can be used by borrowers instantly and lenders can always stay competitive to help your community and grow your business. 

• Configurable Loan Application Flow 

As a manager of a TurnKey Lender instance you can quickly change the loan application flow in a impactful way, adding co-applicants, adding or removing certain parts of the application process, changing the collected data points, setting the documents the borrower will be required to attach to the loan application form, etc. Once again, this doesn’t require platform source code changes, as a lender you can do it in a matter of minutes from your admin dashboard. 

• Configurable Loan Offers and Loan Agreement Generation

Depending on the local regulations, laws, and internal policies the loan offers and loan agreements will differ substantially . That is why in TurnKey Lender lenders can fully customize the contents of loan offers and loan agreements which are automatically generated and sent to the borrowers. Never again will our lenders have to create each of those documents manually.  

• Flexible Documents Management 

To further configure application flow and customer experience, system administrators can create detailed requirements for borrower and loan documents which are collected during the loan application as well as inside the system workplaces and the borrower portal.   

Adding new custom documents used to require intricate system customization. Now, lenders can create new documents and add their collection to the borrower on any stage of their loan’s lifecycle. At the same time employees can quickly find, verify and manage borrower and loan documents easier than ever.   

• Export and Import Payments, Customer, Loans, and Schedule Data 

TurnKey Lender comes with robust export and import capabilities allowing back-office users to conduct exports and imports of data from and into the system with a click of a button. TurnKey Lender allows export payment, loans, customer profiles, payment schedules, etc. The system supports Metro2 reports for reporting to credit bureaus. Batch import and export of customers, loans, disbursements, and payments also couldn’t be easier. 

• Dashboard, Email, and SMS Notifications  

TurnKey Lender comes with 40+ templates for borrower notifications which can be edited and are triggered by the most common events that happen in a life of a borrower and their loan to make sure it’s repaid in full and on time. The system also has a list of back-office notifications for staff members to instantly see important changes to the loans they are responsible for. The notifications can be sent via email, dashboard messages or SMS – depending on the preferences of the lender.  

• Integrations 

The system comes pre-configured for integrations with popular credit bureaus, payment providers, SMS and email services, e-signature providers, etc. The software is white label, and the built-in API Client allows for configuration of any needed third-party integrations.     

• Branch Management 

As a lender, you can create and organize as many branches as you may need and assign specific staff members to each of them to make sure every person has access to the right data and loan applications. 

• Automatic Loan Statement Generation 

This feature helps you save the time your staff spends on collecting, updating, and sending out loan statements. From now on, the System automatically generates updated loan statements for every installment. You can create the template of the statement yourself and set the System to send it to a customer before the due dates. Automating collection, updates, and formatting of this data save every loan officer, and the business, hundreds of work hours. 

• Extensive API client coverage

TurnKey Lender API client makes it possible to integrate all major TurnKey Lender features into your operation’s existing infrastructure. Our API covers: 

• Front-Office functionality   
• Investors portal  
• Customer’s bank payment options management.   
• External customers and loans management.  
• External payments management. 

• Security Features 

Here are just some of the cyber security certifications and features TurnKey Lender Standard platform includes/complies with: 

• SOC 2 Type II Certification.  
• PCI DSS compliant 
• NIST 
• OWASP 
• ISO 27001 
• GDPR (plug-in) 
• User permissions 
• Loan assignment
• Adjustable password strength 
• Two-factor authentication (plug-in)  

Learn about information security in TurnKey Lender

• Theme Editor for Appearance Configuration   

The built-in Theme editor allows lenders to fully customize the appearance and color scheme of your TurnKey Lender instance from an easy-to-use interface. For all the important platform sections you can both add new background images and tweak the color scheme with intuitive color options.

You can learn about all of these features and others in more details in the whitepaper attached below:

[download] 

Reach out to our team to schedule an intro call and become a lender backed by the most advanced, intelligent, sophisticated, and easy-to-use platform on the market.

Get in touch today. 

A power shift in the client financing space is underway. PayPal Credit, Apple Pay Later, WeChat’s Fen Fu, Alipay, and other trend-setting players started the race as customer finance is moving to the point of sale. 

Letting your clients pay for products or services in several installments if they can’t afford to foot the bill in one go is an idea that has been around since the invention of money.  

Of course, in the good old days, it was simple – there was just your shop in the village, and you knew every customer. Keeping a ledger of who owes how much and for what was easy when communities were small. But at some point society came up with credit cards, giving the monopoly over lending to large players like banks.  

Before we continue, wanted to check if you (or your staff) would like this Buy Now Pay Later super guide that goes over everything you need to offer financing to customers in-house

Up until recently, it was almost impossible to offer buy now pay later consumer credit at the point of sale unless you are a bank or a large alternative lender. The reason is – it used to be too hard to evaluate credit risk accurately, and even if you had the capacity for it, underwriting took too long. 

Times have changed. Traditional lending out of branches is riding into the sunset and working with credit digitally is swiftly becoming the new norm. And when a conservative space goes digital, the entry barrier into this space gets lower. 

Customer expectations and online comfort standards are formed by the Ubers and Amazons of the world. And despite their best efforts, most traditional lenders can’t address the current demand for low-to-zero-interest point-of-sale pay later options. This creates an enormous market gap for affordable, seamless, and secure customer finance.  

In the past, you needed immense resources and expertise to start and run a lending business. Now technology has made credit more democratic than it has ever been. Any entrepreneur can partner with a lender like Affirm or even have their pay later program automated and running in-house. Which in our, slightly biased opinion, is a lot better.  

Pay later for lenders and for product/service providers 

If you’re reading this, most likely, you fall into one of these categories: 

1. A finance provider or a payment processor. This kind of business is looking to have their own version of Affirm or Klarna. A project that would let you tap into the booming BNPL consumer lending space, partner with product or service providers, finance their clients and own the customer journey.  
2. Product or service provider that wants to implement a pay later program of their own and not to outsource lending profits and benefits (like loyalty, retention, and control) to a third-party lender. You may be a retailer, equipment manufacturer, healthcare provider, renovation contractor, airline, or any other company that sells a product or a service that you would sell more of if people could pay in installments. For you as a business, the question is whether you want to remain in control of your client’s journey or want to get repaid for the full product/service instantly by a lender. 

Both as a lender and as a provider of goods or services, you may be offering B2C and B2B pay later options.  

If you’re approaching buy now pay later as a lender, you will need to have your margins and loan rates built in a way that you make money on credit. But as a product or service provider offering your own inventory, you’re at an advantage since you make money selling the product, not necessarily from credit itself. So if you as a business owner own your pay later program, you can have very liberal terms (0%, easy qualification, grace periods, etc).  

That said, finance providers, retailers, manufacturers, service providers – we’ve researched and written this piece with all you in mind so keep reading.  

And to make sure we’re on the same page in terms of the benefit BNPL brings a business, here are a few important things you get:  

• Grow your revenue by allowing repayment in installments a powerful and ever-green monetization tool 
• Capture a share of a booming embedded financing market at the beginning of the wide market adoption 

• Increase loyalty and long-term value of your clients and leverage your unique transaction data while making it work for you 
• Establish your role as one of the leaders of the ongoing shift in the marketplace

Buy now pay later adoption statistics 

The market rules remain stable – products and services don’t flourish unless the customer generates demand. Buy now pay later has been growing at a staggering rate which serves to prove that this change in the lending space has been long overdue. Consumers cite these as the reasons for why they use BNPL instead of credit cards 

• It’s easier to make payments – 45% 
• There’s more flexibility – 44% 
• Lower interest rates – 36% 
• Easy approval process – 33% 
• No need to pay interest – 22% 

And even if you look at it simplistically, it makes a lot of sense that credit should occur at the point of sale instead of a separate place that has nothing to do with the purchase. Of course, traditional lenders will retain control over large loans with complex calculations. But you don’t need Bank of America’s underwriting staff to charge a client (automatically) 4 times instead of 1.   

Here are the most important BNPL statistics to date that you as a business owner need to be aware of: 

• 60% of consumers say they are likely to use POS financing over the next six to 12 months. 
• Affirm is originating upward of $1 billion in loans at the exercise equipment company Peloton annually, with a strong average credit score of the portfolio. 
• 25-30% of originations in 2021 happened in-store, using applications submitted by staff. 

• 53% of respondents who have never used buy now, pay later say they’re likely to use it within the next year 
• 71% of Americans who visit the dentist frequently would use BNPL over traditional payment methods. 
• 86% of pet owners would choose BNPL in place of traditional payment methods to help pay for future vet costs. 
• BNPL usage in 2022 by generation gen Z – 44%, millennials- 37%, gen X – 23%, baby boomers – 9.4% 

But it’s not all sunny in the buy now pay later kingdom. 

Buy now pay later criticism, regulation, response, and ethical lending  

And as with any exciting new trend, some people take advantage while others fall into their traps. And this is the situation we’re in. BNPL is a relatively unregulated payment method, and now it’s being looked at more closely. Some of the recent stats indicate that: 

• 57% of people say they regretted making a purchase through BNPL because the item was too expensive.  
• 31% of buy now, pay later users have made a late payment or incurred a late fee.  
• 36% of BNPL users say they are at least somewhat likely to make a late payment within the next year.  

With stats like these popping up, people start to accept that the pay later option is not a silver bullet for getting anything you want at a fraction of a price. You still have to pay and as with any credit – if you have too much of it, it can get out of control.  

It is to be said that BNPL can get a bad rep because of occasional predatory lenders who charge savage interest, aren’t flexible on terms, approve BNPL requests even when the client isn’t able to pay, etc.  

There’s an active global discussion around the rise of BNPL trend. Many regulators and organizations claim that this kind of credit product can lead to irresponsible consumerism. Which may be a little condescending towards the consumers.  Nonetheless, government agencies start to act: 

• The Consumer Financial Protection Bureau (CFPB) issued a series of orders to five major BNPL providers to collect information about the risks and benefits of their solution. The CFPB is concerned about the potential for consumers to accumulate debt too quickly.  

• Same agency opened an inquiry into BNPL lenders, citing concerns about growing consumer debt and data harvesting. 
• Regulators around the globe are starting to act too. The UK is currently exploring the exemption in the Consumer Credit Act for delayed payment of goods and services applies to BNPL.  
• The European Commission and Australia may also seek to regulate BNPL within the next year. 
• European countries are concerned too, and in May, the Swedish Authority for Privacy Protection said it was opening an investigation into Klarna’s checkout service. 

Regulation is a healthy reaction, especially in areas which can be abused, like credit. And in this light, it reinforces the idea of credit being the force for good. And the processes we’re witnessing are the standard flow of things: 

1. First, technology opens new horizons 
2. Then there’s a little period of uncontrolled growth 
3. During that time some consumers get hurt and regulators catch up  
4. Post-regulation maturity phase arrives, rules are set, and the new phenomenon is integrated into our society  

The tech-enabled pay later trend is on the 3rd stage of adoption. This financial tool is at the very beginning of its renaissance with plenty of market space left to claim.  

It’s important for us to note that TurnKey Lender is focused on and emphasizes ethical lending. We create solutions used by tens of millions of borrowers around the globe. The platform we offer lenders is based on the latest security, compliance, and privacy requirements. Its goal ultimately is to give business owners and lenders tools to offer their clients fair, fully digital, accessible credit where and how they need it.  

It’s common in our culture to give credit bad connotation, but a good illustration that showcases BNPL as a force for good is a vet clinic where you can opt in for a pay later option for surgery on your pet which you pay out in 4 months. So you get what you need without maxing out all the credit cards. 

And for an ethical enterprise, pay later options do make the business more profitable and help it grow. Even if you’re charging zero interest, you still get customer loyalty, retention, increase purchase frequency, and customer LTV.  

Why TurnKey Pay Later for buy now pay later automation

TurnKey Lender automates consumer and commercial client financing programs for payment processing providers, digital banks, ATM networks, ecommerce platforms and large brands like BigPay, Globe Telecom, BizPay, EasyBillPay, StockPay, FCTI, Peppermint, H&R Block and hundreds of other businesses in 50+ countries.  

Every type of consumer and business finance is changing. Agents of change are companies that leverage their transactional data to offer risk-free credit with the best possible UX & UI, fairest terms, and seamless collections. With TurnKey Pay Later you get:  

• Full white labeling of the platform and all necessary adjustments to make lending feel like a native part of your business  
• End-to-end automation of processes from application processing and decisioning to servicing, collection, and reporting 
• Unmatched configuration freedom – from customer-facing UX and decision-making logic to amortization schedules and reporting 
• Multiple AI-based credit scoring models learning from real transactional and customer data allow for lowest possible credit risk 
• Enhancement of the payment services through flexible lending options with the fastest time-to-market 

Here’s what some of our pay later customers say: 

• “Thanks to TurnKey Lender we were able to challenge our region’s banking status quo and make the transition from being an e-wallet to becoming a full-fledged digital bank licensed by the government and offering affordable credit to our clients. We’re just getting started and are planning to expand our product range thanks to the flexibility TurnKey Lender gives us. “ 

Chief Product Officer 

BigPay 

• “TurnKey Lender allows any of bizmoto’s 55,000+ qualified agents, bizmoGo riders and registered network members to seamlessly apply for micro-enterprise loans to grow their business.” 

Managing Director and CEO 

Peppermint Innovation 

TurnKey Lender for BNPL – Standard and Transformer 

TurnKey Pay Later has two platform editions for BNPL lenders – Standard and Transformer. You can see from the names that they are aimed at projects of different scale and complexity. But you can be sure that both will help you lower the credit risk, streamline collections and make more sales by offering better terms and user experience.   

1. TurnKey Lender currently automates embedded lending for 200+ enterprise clients with 98.5% satisfaction rate. Over 50 million consumer and business borrowers used this platform to get financing.  
2. An e-wallet company became a prominent challenger bank with TurnKey Lender. Aiming at 300x growth TurnKey Pay Later proved the capacity to process over 100 loan applications a minute with huge further scaling potential. 
3. Tens of millions of telecom customers use instant airtime loans embedded into the operations of a country’s leading provider.  
4. TurnKey Pay Later is the company’s solution that automates every part of launching and scaling a client financing program across multiple products, countries, and business verticals.  
5. This embedded lending platform is user-friendly enough for any business to use it to finance their clients 
6. Multi-language and multi-currency platform that is no-code and easily adaptable to meet every one of your requirements. 
7. Offers fastest time-to-value: if you need classic Pay Later capabilities, you can be up and running in as little as two weeks. 
8. TurnKey Pay Later will be natively integrated into the customer journey, your clients will work with you from a functional portal and your transactional data used in credit scoring will reduce your risks while enabling instant decisions. 

TurnKey Pay Later – Standard    

The Standard edition of TurnKey Pay Later provides end-to-end automation of the B2C finance lifecycle and is the easiest to use and launch lending platform in existence. It digitizes application processing, vendor management, origination, risk scoring, payments collection, and reporting. The platform’s bank-grade AI under the hood analyzes borrowers and makes correct loan decisions instantly. 

TurnKey Pay Later – Transformer  

TurnKey Pay Later Transformer is a no-code modular platform that supports both consumer and business lending, allowing for multinational and multicurrency operations. It’s an end-to-end solution that can be used to solve any kind of lending automation challenge, business logic, decisioning flows, and can bring to life any complexity of credit products in minutes. The Transformer edition of the platform is made for unique business cases, yet it makes sure it has all the common modules and features preconfigured, and its time-to-market is second to none. No matter the business model or the scale of the operation – Enterprise can handle it. 

Final thoughts 

Even fly now pay later is a thing now. We’re in the middle of a huge credit market redistribution. The struggle is going on to see who will own the point-of-sale finance. Who will have the privilege to extend credit to a customer and allow them to pay for a product or a service in installments.  

Will it be a traditional bank that implements a pay later program, an innovative lender like Affirm or Klarna, or will it be the business owner themselves? Will it be a few large providers or a myriad of in-house operations? 

That’s yet to be decided.  

All we know is that TurnKey Lender currently automates embedded lending for 200+ enterprise clients with a 98.5% satisfaction rate, and we’d love for your business to become our next big success story.  

Schedule an intro call with us today.

Initial SaaS filtering criteria 

There are many loan origination systems. And most of them don’t meet the lender’s most basic Software-as-a Service (SaaS) requirements.  

So, before we go into the questions specific to loan origination solutions, here are the general quality assurance criteria to consider with any such core technology choice. 

• Pricing structure – While this applies to all SaaS, in finance many vendors charge extra depending on user count, portfolio growth, hidden fees, and contract length.  
• Cybersecurity – A fancy user interface and quick load speed is good as long as your (and your client’s) security isn’t compromised. Ensuring best practices in cybersecurity is paramount. 
• Regular updates – SaaS solutions need to update several times a year to align with upcoming trends, industry standards and shifts. It’s the only way to address business needs long-term while maintaining interoperability with the newest technology. 
• Support & training – your LOS vendor needs to provide efficient training and quick tech support to ensure you’re seen as a reliable finance provider.  

• Track record – don’t hesitate to ask for direct references, not to mention relevant success stories to gain valuable business intel and see how the LOS vendor treats their customers. 

These criteria are crucial, but it takes a little more to navigate the loan origination software waters.  

Loan origination software selection must-haves  

1. Loan application flow configurability  

• A hard-coded, rigid application flow won’t let you capture market opportunities. Financing landscape changes and lenders need to stay agile to address borrowers’ challenges faster and better than rivals. 

• With TurnKey Lender you can quickly update the loan application steps to collect new required data, get legal e-signatures, manage document templates, include guarantors, secured assets evaluation and more. 

2. Real-time application processing 

• Borrowers expect to get approved for a loan as quickly as they checkout in their online store. It’s impossible with manual application processing. This is why all of scoring and loan decisioning heavy lifting needs to be done on autopilot. 

• TurnKey Lender processes scoring data real-time with award-winning Decision Engine offering in-depth control over scoring criteria and decision rules. This offers borrowers instant clarity, reduces drop-offs, and amplifies satisfaction as an edge in a competitive market. 

3. Scalability to handle growing portfolios 

• Few things hamper growth more than a frozen loading screen, repeated human error, and data losses that happen when a loan origination system doesn’t scale alongside your company. Make sure your vendor can handle surging scoring needs and transaction volumes while keeping the load off staff. 

• TurnKey Lender’s LOS is used by B2C and B2B lenders globally to work with ~100 million borrowers. With over 90% of all lending processes completely automated, human error and credit risk and minimized while ensuring speed. 

4. Innovative credit product development 

• Stagnancy in a fast-evolving credit market can be fatal. An inflexible LOS system eats up your time and disables innovation which requires speed in rolling out new offers and adjusting to borrower’s needs. 

• TurnKey Lender allows creditors to be as dynamic as they need. It takes minutes to create, test and launch a new, fully automated credit product which meets your exact requirements in terms of fees, schedule, terms, regions, and other criteria. 

5. Credit scoring accuracy and flexibility 

• Simplistic credit scoring directly cuts the return on every dollar you invest. Lenders need an LOS that takes into account all relevant up-to-date borrower data to make better loan decisions faster.  

• TurnKey Lender’s award-winning Decision Engine uses AI to sort through millions of data points instantly and give you an automatic decision or a recommendation you can rely on. This and the elimination of operational bottlenecks lets you reach a wider audience and offer borrowers better terms than competitors.   

6. Keeping up with industry and regulation 

• Outdated SaaS and legacy in-house solutions drain a business with inefficiencies, incompatibility with new tech, human error and poor experience. Make sure your vendor keeps improving your infrastructure while you focus on your portfolio growth.  

• Regular platform updates incorporate best practices and findings from B2B and B2C lending operations using TurnKey Lender in 50+ countries. 

7. Supporting digital credit beyond loan origination 

Fragmented lending solutions lead to errors, higher costs, and inconsistencies in borrower experience. It’s important that your LOS vendor lets you upgrade the system with new features and integrations out of the box. 

TurnKey Lender LOS is a part of end-to-end lending automation infrastructure that covers all elements of consumer and commercial credit. From loan processing and disbursement to servicing, debt collection auditing, and reporting – TurnKey Lender does it all.  

8. Reliable uptime 

Reputation losses withholding, the average cost of downtime for businesses is $5,600 per minute. This means that even a short outage can have a significant financial impact. 

TurnKey Lender reliably delivers a 99%+ uptime, ensuring a seamless cloud-based experience, keeping services online and dependable, no matter where operations are based. 

9. Borrower’s self-management capacity 

Borrowers hate being confused about anything concerning their finances. Intuitive user interface and clear communication make all the difference to the person applying for finance.  

Borrower gets a personalized online loan application process with an instant decision. They can pick their application up and all their lending interactions take place in an intuitive borrower portal. 

10. Time-to-market for initial release and updates 

You need to be able launch credit products, add integrations, and adjust application flows quickly and autonomously. This disqualifies most LOS providers who take months to deliver requested updates due to the software complexities.   

TurnKey Lender comes with pre-configured location- and industry-specific credit calculations, workplaces, and integrations to ensure 3-5 faster time-to-market. Once in place, most lenders start to handle all aspects of credit on their own, but TurnKey Lender Team is constantly at your disposal for any additional features configuration. 

The main thing that levels the playing field for smaller businesses is technology. Big banks often choose to create their own custom solutions and support tons of legacy code. That’s where alternative, embedded and business lenders can gain a competitive edge by deploying an end-to-end lending management system that has all the functionality out of the box.

With TurnKey Lender, one can automate every step of the process of lending for a project. All that’s left to a business owner is to set up an effective website and take care of marketing. But there are still some common myths when it comes to what automation can and cannot do. And believing in these myths leads lenders to higher operational costs and more human error in the things that could be more secure and much faster have they been automated.

Lending automation made accessible to everyone, not just banks

It’s easy to assume that a proprietary financing program is off-limits for a car dealership, equipment manufacturer, a medical institution, or someone else selling goods or services. Well, it’s not.

It’s the same as with people who humanize their cars until they change a tire and understand that’s it’s nothing more than a ton of metal, plastic, screws, and rubber. Lending tech is similar in that it’s just a specific set of functional modules and integrations that you need to set up and deploy correctly. Then all you have to do is maintain a working mechanism and enjoy your financing program the same way you enjoy not using public transportation.

Loan application, risk evaluation, credit decisioning, origination, underwriting, servicing, collection, reporting – all of that sounds complex only for as long as you haven’t taken an advanced lending automation system for a test-drive.

General areas of a lending operation that can and should be automated

When we at TurnKey Lender say that all the steps of the lending process can and should be automated, we mean it. Just to show you an example, our platform takes care of the following for our clients:

1. Loan origination
2. Risk evaluation
3. Credit decisioning
4. Underwriting
5. Collateral management
6. Debt collection
7. Loan servicing
8. Reporting
9. Supervision
10. Regulatory compliance
11. And much more. You can see for yourself when you have a demo of the system from our team. 🙂

With TurnKey Lender this bank-grade level of automation doesn’t take huge investments. But we’ll talk about that a little bit down the road. Most importantly, automating all of those steps helps lenders:

• Cut credit risks, thanks to AI-driven credit scoring.   
• Replace outdated processes with software tailored to the business’ needs.   
• Eliminate unnecessary paperwork throughout the lending process.  
• Reduce operational cost of running a lending business.    
• Get rid of any human error in the entire crediting process.  
• Reduce the cost and time-to-market of launching an e-lending business.  
• Unify all of loan management tasks in one end-to-end platform. 

In this guide, we’ll go over each of those lending process elements and see which you should automate in 2023. And we’ll start with origination.

Loan origination tasks that can be automated

For both consumer and commercial lenders, loan origination covers everything that happens between a customer submitting their loan application and the funds being disbursed or the loan being declined. So that’s quite a chunk of work. In the past, it used to take a staff of originators. Now their work is done by intelligent algorithms. And the steps to automate here are:

Configurable loan application – the clients should be able to fill out all the forms online in their browser and device of choice. The form should be tailored for the specific loan product and depend on the jurisdiction’s local and international regulations. It should be easily adjustable for the lender and easy to use for the borrower.

Adding and verifying bank account – borrowers should be able to quickly and easily add and verify their bank account details to the loan application. In addition, modern lenders will automatically collect and use bank statement data to allow for a more accurate credit scoring.

Application processing – of course, pretty much any lender will want to involve a human being in the loan approval process. But the application processing should be automated to the highest possible extent. The key here is the proprietary advanced scorecard. This intelligent piece of software should be included within the system and have an intuitive back-office interface for customization. This will help loan managers make informed decisions based on automatic borrower evaluations.

Email communication – Of course, there should be an option for the client to get in touch with the real person at any moment, but why do manually what is better done automatically. There should be a customizable email template editor that sends custom emails to potential customers on certain triggers.

Underwriting and risk-scoring tasks to automate

Loan underwriting – the right underwriting automation will include a proprietary credit scoring model that helps the business reduce credit risk and improve portfolio yield. Lenders often have their own scoring criteria, which they should be able to add to the system. But keep in mind that the solution you choose must have advanced scoring algorithms built-in out of the box.

Loan decisioning – even though, there should be a way for a loan officer to manually approve, deny or send back loan application, the system should provide you with all the insights and analytics required to make an informed credit decision. And, if you want it to, it should be able to process the loans on its own.

Risk evaluation – this one’s tricky. But advanced automation solutions utilize AI (machine learning and deep neural networks), Big Data, as well as traditional and alternative evaluation approaches to help lenders make the most accurate decision possible.

Loan offer – once you’re ready to approve the loan, there needs to be an option to extend one or several loan offers to the borrower which they will receive in the personalized web-based borrower portal.

Electronic signatures – everyone’s already used to being able to sign documents online safely. That’s why it’s important that when a lending operation goes fully digital, it should have seamless integration with well-known e-signature software like SignNow or Adobe Sign.

Loan servicing tasks to automate

Loan servicing is another sphere where automation can make a business owner’s life significantly easier. And it’s not just about the disbursing funds for the approved loans and monitoring the repayments.

Digitalization of statements – the expensive and hard to manage paper statements should long have been automated and digitalized. Given that all the data is located online these days, that’s more than real.

Interaction tracking – all the interactions between the lender and the borrower should be logged, collected, and easily accessible by the system admin. The data that should be automatically collected includes things like payment history and customer service queries.

Credit bureau data updates – the system should automatically sync with the credit bureaus to pull the recent data and update it for all the borrowers.

Payments alerts and reminders – the users should get automatic alerts reminding them about upcoming or overdue payments. As well as the lender should get alerts when there’s any potential for bad debt so that they could react accordingly.

Account management – users’ details and documents should update automatically each time status is changed or payment is overdue.

Schedule management – borrowers prefer lenders who not only provide better loan terms (thanks to costs saved through automation and risks cut through AI-driven scoring) but also those who can emphasize with them and change the schedule, rollover some payment or adjust the fees when the need arises. TurnKey Lender provides an unmatched flexibility when it comes to charging payments and managing the loan schedule.

Loan collection automation

Action planning – for each new client, lenders need an easy way to set up a separate collection and action calendars. They may want to check in on it manually, but once the workload grows, the required actions need to happen automatically.

Write-offs – knowing that the write-offs happen automatically without manual action, lets lenders focus on more important things. At the same time, the borrowers should receive notifications and alerts about the upcoming and overdue payment and monitor automatic write-offs.

Collateral management

Collateral types, valuation, and revaluation – the system should be flexible enough for the users to submit their collateral and for the managers to have everything they need to work with these assets.

Automatic loan reporting

Portfolio, performance, risk ratings, collection rating reports – to stay up to date and have a firm grasp on what’s going on with the company, lenders need all kinds of reports about their borrowers, loans, and risks. TurnKey Lender lending software will collect, process and format all the needed data to put together proper and easy to digest reports.

Regulatory compliance

Compliance might be the biggest head- and heartache of the lenders globally. With the laws changing all the time, it may be hard to adjust and keep track of all the updates. Advanced lending software, if integrated with the right compliance solutions, can make lender’s life all that easier by automatically controlling the borrower’s quality, collecting all the required documents and keeping business compliant from the start. Not to mention reporting functionality that transparently stores and archives all the data in a fashion that will please the regulator.

Data imports/exports, integrations, appearance, employee tracking, and much more

Providing borrowers with the experience they have come to expect in the digital post-pandemic economy requires a ton of functionality that is interconnected and operates as a single well-oiled machine. From adjusting the application form to collecting the required data, understanding the inputs and analysing them, making a system decision of a loan, building a schedule and collecting the installments – creating all of the features and integrations from scratch is a herculean task that took TurnKey Lender’s award-winning team years. But the result – the most sophisticated, intelligent, and powerful lending automation software on the market – is worth it.

Based on the input we’ve gathered from our clients in 50+ countries, we’ve built the Unified Lending Management software which solves all of the challenges a business faces when entering the lending space anew or automating the operations of an existing crediting business.

How TurnKey Lender does that for you

All of the lending tasks described above and much more are already realized in TurnKey Lender’s end-to-end solution for creditors of all sizes. Origination, underwriting, collateral, servicing, collection, reporting, etc – our software does it all letting you focus on finding the leads for the platform to process.

The majority of lending operations still do many of these tasks manually. Imagine the amount of time and money wasted. Not to mention, all the demographics that stay unserviced because of operational difficulties and unfair credit scores. By providing lenders worldwide with affordable, accessible and easy to use tools, TurnKey Lender works on achieving global financial inclusion. And with that in mind, our goal is to make lending fully automatic, freeing our customers to deal with other important things.

TurnKey Lender’s solutions are white-label (so you will be able to add your own branding), easily deployed from the cloud, secure and powered by the most advanced AI and machine learning algorithms.

The pics you saw in this post are from the TurnKey Lender Box solution  – an end-to-end system that can be deployed and fully operational within a day of signing a contract. It is created specifically to address all the needs of any kind of lending operation from the get-go. And if you want to go even further with your customization freedom, consider TurnKey Lender Transformer. There are objectively no better lending solutions on the market right now. And we keep on improving all of our products, so that isn’t going to change any time soon.

If you aren’t using TurnKey Lender yet, do get a personalized demo of the system. And if you’re already a client and would like to see if there’s anything else we could automate in your lending operation, feel free to get in touch with your TurnKey Lender manager. Either way, our team will be happy to show you around and demonstrate exactly how our tools will take your business to the next level.

• The total estimated value of the US small business lending market, according to the Consumer Financial Protection Bureau (CFPB) is $1.4 trillion. 
• International B2B lending market, according to a World Bank report, the world’s micro, small, and medium-size enterprises have unmet finance needs of approximately $5.2 trillion a year. 
• SME loan sizes for a large bank average $564k, for a small bank – $185k and for an alternative B2B lender -$80k. 

Looks like a market ripe for an innovative lender to take their share, right?  

It is.  

But at the same time, large, non-local banks are responsible for 89.5% of loans under $100k given to small businesses and an even larger proportion of bigger loans. 

This disproportion business lending giants leads to statistics like these: 

• About 30% of business finance applications are declined because of insufficient credit history data. Keep in mind that often legacy global scoring approaches don’t apply well to niche SME. 
• According to SBA Attorneys, only 20% of businesses qualified for the financing they requested and 48% got any financing at all.  
• According to the Small Business Lending Index,the loan approval rates range from 13% for big banks to 24% for alternative lenders. 

Where local or niche businesses could’ve been financed by specialty lenders or local creditors understanding their needs better, they went to a bank. And most often got declined. 

The unserviced part of the market remains huge. It used to make sense, because legacy commercial lending automation used to be boutique and therefore expensive that only a mammoth financial institution could afford to maintain it.  

But it doesn’t anymore. 

Even though this status quo was held for a while, the B2B lending technology market has changed dramatically. Making it possible for a wide range of alternative and specialty lenders to automate every part of their commercial lending process in-house achieving lower credit risks, lower margins and operational costs, and therefore, better terms for their business borrowers. 

Before we continue, we wanted to check if you (or your staff) would like this white paper that describes how to automate all parts of the commercial lending process. 

What kind of commercial lenders are there? 

We’ll go into more detail as we delve into the topic of commercial credit automation, but on a high level, commercial lenders can be categorized this way.  

• Specialized commercial lenders – these lenders focus on specific business financing types like equipment leasing or invoice financing. They offer tailored solutions and often show more flexibility than banks. 
• Alternative B2B lenders – they provide non-traditional financing like peer-to-peer lending and crowdfunding, targeting businesses that may not qualify for traditional loans. Higher risk, perhaps, but with the right scoring, decisioning, and overhead – can be a goldmine. 
• Community banks and credit unions – traditional institutions offering commercial lending products such as term loans, lines of credit, and real estate financing. They cater to businesses with established credit and history, typically requiring collateral and stringent lending criteria. 

Commercial lending verticals with the highest growth potential 

It only makes sense to enter a commercial lending space in the industry you know better than most. But within this space, there is a wide range of credit products and approaches your organization can take when extending B2B loans to your customers.  

We closely monitor the global lending trends in the markets we focus on. And in the recent years, we have seen the most significant growth in the following commercial lending verticals in North America, Europe and Southeast Asia: 

1. Direct B2B lending –  a lender provides lump sum loans to businesses, with repayment over a specific period, used for various purposes like expansion or equipment purchase. 
2. Invoice financing/accounts receivable financing – It’s a short-term borrowing where businesses sell their outstanding invoices for immediate cash, improving cash flow and enabling growth. 
3. Equipment financing – It’s a specific loan or lease agreement for businesses to acquire equipment, allowing them to avoid large upfront costs. 
4. Merchant cash advance – It offers businesses a lump sum payment in exchange for a percentage of future credit card sales, suitable for businesses with irregular cash flows. 
5. Business line of credit – It’s a revolving loan providing businesses with access to funds up to a limit, offering flexibility for managing cash flow and financing opportunities. 
6. Business capital – It includes a range of funding options providing capital for growth and expansion, such as equity investments, venture capital, or mezzanine financing. 
7. Employee salaries/payroll financing – It’s a short-term loan that helps businesses cover employee wages during cash flow constraints, ensuring on-time payment. 
8. Digital refinancing – It involves replacing an existing loan with a new one, often with better terms or lower interest rates, improving cash flow and debt management. 
9. Asset-based credit – It uses a company’s assets as collateral for a loan, popular among businesses with valuable assets and strong growth potential. 
10. Inventory finance – It’s a type of asset-based lending using a company’s inventory as collateral, helping businesses meet customer demand and take advantage of bulk purchasing discounts. 
11. Trade finance – It facilitates international trade by providing funding and risk mitigation, including instruments like letters of credit, export credit, and insurance. 

What can you finance as a small business lender? 

And while these are the businesses that come to us most often right now, this doesn’t mean that other B2B verticals are less well-positioned for rapid growth. So the key for a commercial lender is to find your niche, craft the best offering you can on one or several of these items, depending on your small business customers’ current needs. 

• Startup costs 
• Working capital  
• Inventory financing 
• Purchasing equipment and machinery  
• Hiring staff 

With a modern commercial lending platform like TurnKey Commercial, pivoting and adjusting to market changes quickly won’t be a problem. 

Cutting costs and minimizing risks with commercial credit automation 

To carve out your own piece of the commercial lending space, you’ll need to serve your existing or emerging industry better than the competitors.  

Large institutions relying on legacy solutions find it very challenging to develop suitable lending solutions for their SME customers while maintaining viable associated service costs.  

This allows smaller lenders to use lending tech and take up their new roles in the B2B finance lifecycle. Some do b2b loan origination and underwriting while partnering with banks for loan management. Others handle all aspects of commercial lending themselves.  

There are two main approaches, and we’ll go over them in more detail in chapter II. But on a high-level, it’s: 

1. Newcomer commercial lenders build custom solutions consisting of several integrated tools. For example, TurnKey Lender Origination module and Decision Engine integrated into your existing banking system. 
2. Others go for an end-to-end system like end-to-end TurnKey Commercial platform to eliminate any need for data or automation fragmentation. 

Conclusion 

Automation unlocks a window of opportunity for commercial lenders including community banks & credit unions, specialized commercial lenders and alternative B2B lenders.  

Modern lending automation solutions allow you to set up automated credit scoring and decision-making based on the data you choose which allows to lower the credit risk and improve ROI  

With the average interest rate for a small business loan lying between 2.54% – 7.01%, commercial lenders who are agile and informed enough to offer better credit terms while cutting costs, stand to benefit immensely.  

Read this next

This is a part of a 3-chapter series with all you need to know to automate any kind of commercial lending process. You can continue with this course here:

• Part II: All you need to know before you automate your commercial lending process
• Part III: B2B credit automation that cuts operational costs and minimizes credit risk
• White paper: How to automate every part of the commercial lending process

And even the large banks that managed to digitize during Covid are 40% less productive than digital natives due to organizational silos and the need to migrate with complex legacy infrastructure.  

These inefficiencies, delays, and overhead costs inflate the price borrowers pay for financing. For lenders implementing automation across the loan lifecycle, particularly in decision-making, this presents an unprecedented opportunity.  

Manually gathering and processing credit scoring data instantly puts lenders at a disadvantage compared to competition offering instant approvals. However, with modern lending technology, creditors automatically pull and process data from various sources, including credit bureaus and bank statements based on their own evaluation criteria, reducing decision time and mitigating risks. 

But first, wanted to check if you (or your staff) would like this white paper with all important details about TurnKey Lender’s AI-Powered Credit Decision Engine

What data can lenders use in automated loan decisioning 

Data is the cornerstone of automated loan decisioning. The more diverse and comprehensive the data set, the more precise and reliable the decisioning process.  

Traditional data points used by lenders include

• Loan application form – the information you gather in the loan application lets you get the necessary insight for all further analysis.
• Borrower’s credit history and credit score – these provide insights into past financial behavior and repayment habits.
• Income and employment statistics – these data points give an understanding of the borrower’s capacity to service the loan. 

But alternative credit scoring can provide even more insight in many cases where traditional data isn’t sufficient or accessible. It can include:  

• Utility payment history – regular payment of utilities suggests financial responsibility.
• Rental payments – consistent rental payments can demonstrate a borrower’s ability to manage long-term financial commitments.
• Social media behavior – non-traditional yet insightful, this can hint at a borrower’s lifestyle and spending habits.
• Psychometrics – behavioral analysis of the borrower during the loan application process using the built-in browser and smartphone metrics proved reliable. 

How automated loan decisioning process works 

It’s easy to say that automated loan decisioning streamlines the loan approval process, making it more efficient and accurate.  

But here’s a high-level overview of how it works: 

1. Borrower data collection – the borrower or business enters their personal and financial details into a personalized and localized application form. The richness and accuracy of this data are crucial for the next steps.
2. Data pulling – an advanced credit decision system pulls relevant data from various external sources like credit bureaus, the customer’s phone, utility companies, or even social media platforms. This enriches the data set for processing.
3. Data processing – the collected data is processed through predefined scoring models and decision rules. The accuracy of the scoring here depends on your knowledge of the market and your borrowers. With a system like TurnKey Lender, you have complete control over how the system interprets different parameters and what weight is assigned to what scoring factors.
4. Decisioning – if the application meets the set rules, the system makes an automatic loan decision. Should any issues be flagged during processing, the application is forwarded to the lender’s dedicated workspace. Here, a summary of the findings is presented, which can be expanded for detailed viewing and manual intervention if necessary.

Embracing this automated process significantly accelerates loan decisioning while reducing the chance of errors and bias. This sounds obvious until you realize the difference it makes.  

The average loan cycle time to this day is typically up to 1 week. For business loans it’s 4-5 weeks. Imagine the selling value of being able to offer same day approval.  

Using artificial intelligence and big data to grow a lending business 

According to the report on Artificial Intelligence and the Future of Financial Services by the New York Fed, AI could automate up to 40% of loan origination tasks, saving lenders an estimated $100 billion per year. Furthermore, AI could improve loan approval rates by up to 5%, leading to an additional $50 billion in loan originations, and reduce the time it takes to originate a loan by up to 50%, allowing lenders to focus on more complex tasks.  

Similar findings can be found in a mutlitude of other reports like this one by Moody’s Analytics, which underscores how automation can further reduce the time it takes to originate a loan by up to 50% and increase loan approval rates by up to 20%.  

In a nutshell, the consensus in the industry is clear: AI and automation are not just the future, but the present of the lending industry. The efficiencies they introduce in terms of speed, cost savings, and improved approval rates are pivotal for lenders aiming to stay ahead in this rapidly evolving landscape. 

But how real is it really? 

With AI, it’s often hard to instantly see if it’s really necessary or it’s used mostly for marketing buzz. 

In the case of digital lending, it is inevitable, and it is here.  

Simply because of the deep dependence of credit decisions on data which is becoming more and more accessible to business owners and technology vendors.  

Artificial intelligence gives us the ability to process immense amounts of data almost instantly. If you’re using the right approach to automating loan decisioning, these powers can be harnessed to do analytical heavy lifting for your team vastly improving the speed, depth, and accuracy of research. 

Most commonly these AI and Big Data are used to identify creditworthy borrowers who are overlooked or unfairly penalized in traditional scoring models, by analyzing non-traditional data sources. 

This is where TurnKey Lender’s Decision Engine shines most. Proprietary AI and Big Data technology praised by the industry, delivers superior automated loan decisioning. The Decision Engine is equipped to analyze diverse data sets, from traditional credit scores to alternative data like financial statements or online behavior. As a result, lenders using TurnKey Lender’s platform can confidently extend credit to a broader range of borrowers while minimizing risks. 

How TurnKey Lender automates loan decisioning 

TurnKey Lender is pioneering technological innovation in credit since 2014 with unprecedented lending intelligence and automation solutions.  

From the start, the key advantage of the company were its proprietary intelligence and sophisticated risk management and credit scoring solutions. So let’s delve into how TurnKey Lender enhances various aspects of your loan decisioning process 

1.Modern automated underwriting with AI  

TurnKey Lender’s automated underwriting software makes use of artificial intelligence and machine learning to quickly and accurately gather and evaluate borrower’s creditworthiness based on the data and the criteria you select. 

2. Advanced credit scoring techniques

Our team has configured, tested and deployed hundreds of scoring models for our customers using the TurnKey Lender’s platform. And the more tech-savvy clients make scoring changes to adjust risk levels with new insight themselves daily. TurnKey Lender provides a flexible credit scoring system that’s adaptable to different lending scenarios and regulatory environments. Analyzing these vast arrays of borrower data let’s our loan origination software deliver reliable credit assessments and automated loan decisions. 

3. Efficient loan decisioning for consumers and businesses

Be it for personal loans or business loans, TurnKey Lender’s robust capabilities can handle both. The consumer lending software ensures a streamlined decisioning process for individual borrowers. On the other hand, for businesses, the commercial lending software caters specifically to the more complex analysis allows to use business accounting and CRM data for credit scoring too.  

4. Holistic borrower evaluation for better risk management

TurnKey Lender doesn’t just stop at traditional evaluation methods. For our clients, the most common alternative credit scoring data often includes: 

• Bank statements  
• Employment data 
• Rent payment data 
• Utilities payments  
• Online behavior  
• Third-party scoring data  
• Guarantors’ data 
• Collateral assets evaluation 

5. Seamless legacy system integration

Understanding the challenges of migrating from complex legacy systems, TurnKey Lender ensures its platforms can integrate smoothly. Whether you’re looking to update your underwriting or decisioning process, the decision management system offered by TurnKey Lender guarantees a transition that doesn’t disrupt your productivity. 

Joining the new industrial revolution in credit 

The shift from manual to automated loan decisioning is not just a trend – it’s an industry imperative. And it’s not even just about the tangible benefits like the drastic cost savings and improved loan decision time/quality. It’s just where all your borrowers live. And as a lender in the world where credit gets more accessible every day, you have both bad and good news.  

• On the one hand, you have to compete online. This is different and takes effort and investment.  
• But on the other hand, with the right offering and experience, your audience reach isn’t limited by anything anymore. 

We at TurnKey Lender will be honored to be your trusted ally in conquering this new reality. 

Digital transformation for banks means making a brave and a long-overdue step toward intelligent automation and processes streamlining. An in-house or an outdated solution can turn this process into a nightmare with endless downtime, errors, and countless hours of development. But with the right tools, digitalization not only pleases the clients but also leads to a reduction in operational spending, an increase in efficiency, and growth in the core business.

Customers have come to expect a certain level of immediacy with their online banking experiences, and lending has been the last major part of banking that hasn’t embraced the digital age. But now that the technology is developed and stable enough, banks, credit unions, and other traditional lenders can go through a digital transformation painlessly and give a fair fight to the alternative lenders.

Digital transformation isn’t a voluntary process for banks. It’s the harsh new reality of the market that forces the hands of traditional lenders. For decades banks had an overwhelming monopoly on the lending market. Times have changed as banks started to lag in terms of the online experience they deliver. Digital transformation of a bank is seen as an incredibly expensive and lengthy process. But it doesn’t have to be like this.

A while back, banks had every chance to lead the digital revolution by example. They had the resources to go fully digital and provide borrowers with a secure, fully online experience. But the lack of competition made them stick to old systems without transforming and reforming their enormously complex outdated processes. For far too long, they were led by the good-old “if it ain’t broke, don’t fix it” principle. The only problem is that it was “broke”.

Due to that approach, the banks lost a big chunk of the marketplace that got filled by companies that lean into technology instead of tolerating it.

Remember when ten years ago e-commerce was the buzzword everyone was using too much? Then providers like Shopify came along and lowered their industry entry barrier to the point where anyone could launch a well-designed easy-to-use online store within a day and on a limited budget.

That’s what’s happening to e-lending right now with FinTechs like TurnKey Lender providing accessible and intelligent lending automation solutions for Unified Lending Management (ULM). With them, anyone from a retailer to an auto dealer, to an alternative lender, to a large-scale telecom, a credit union or a bank can launch a fully functional, end-to-end, intelligent, and easy-to-use automated lending operation.

DIGITAL TRANSFORMATION TRENDS

It’s easy to get caught up in doing things the old way and ignore the new trends and styles of doing business. But nothing speaks to people in finances as clearly as numbers. So here’s just a couple of stats to give you an idea of what the borrowers have come to expect from their lender in the post-COVID marketplace.

• Just 40% of consumers plan to return to the in-branch financial services post-COVID. – – Novantas
• New mobile banking registrations jumped by 200% in April 2020, while mobile banking traffic rose 85% – CNBC
• The most common method for applying for a small-business credit card or line of credit is a desktop or laptop computer, yet 60% of small businesses rate their bank as average or needing improvement during the digital onboarding process. – Deloitte
• Millennials now make 54% of their purchases online as of 2019 – Pure360
• 62% of global banks expect to be digitally mature in 2020, compared with just 19% in 2018 – E&Y
• Even in 2019, almost half of millennial respondents ages 18 to 34 said they’d consider moving their accounts to a digital-only institution – Marqeta.

The unfortunate delays of modern lending and how your bank can tackle them

Now that we’ve established that digitalization is inevitable, let’s look at how to tackle the transformation.

The lending process for many modern financial organizations is surprisingly prolonged – especially given the current state of technology. Even with banking startups springing up left and right, offering a completely internet-based experience and mobile deposits, the world of retail lending hasn’t caught up quite as quickly.

Online lending is out there, but – even with rapid loan approvals – the time to cash that many modern borrowers experience can drag on for up to nine days. This is true even at banking organizations that offer sleek, secure apps and instant mobile transfers, leaving customers wondering why the lending side of banking is still so sluggish to embrace digitalization.

With so many popular banking features already digitalized, why are there still so many organizations that have neglected automation of their lending processes? Why do loans still take days to arrive in our bank accounts?

The answer is logical. Lending is a way more complex process than simple money transfers and deposits with the time-consuming stages like credit decisioning and terms finalization.But it’s not just time to cash, either. Even though most banks have ditched many of their paper-based systems, loan origination and loan servicing often still require some sort of branch or team member intervention – including some of the most modernized banking organizations in the market.

For traditional lenders, banks and credit unions the delays come from the fact that having digitized the easy things, they are far from automating complex processes like credit decisioning and generally, loan origination.

These processes have too many touchpoints, the originators manually analyze the applications, run checks, evaluate risks, and finally make the loan decision – all using traditional data sources, workflows, and algorithms. Those that haven’t made it that far from the way our parents were evaluated. In the modern environment, it takes intelligent AI-driven algorithms to process this data and get meaningful insights from it in a matter of seconds. And that’s already made possible by SaaS providers like TurnKey Lender. 

Digitalization is inevitable. However, bankers are often scared of its alleged cost and time-to-market. Yet with the modern level of FinTech, digital transformation for banks has become easier, more affordable, flexible, turn-key, and accessible than we’re used to thinking.

DIGITAL TRANSFORMATION SOLUTIONS FOR A BANK’S LENDING PROCESSES

Unified Lending Management (ULM) is an umbrella term that covers every aspect of intelligent lending processes automation. From application processing, borrower evaluation, and loan origination to underwriting, loan servicing, collection, and reporting. Providers like TurnKey Lender specialize in creating ULM solutions that would be easy to integrate with the core banking system as well as be convenient both for the banker’s staff and the borrower.

TurnKey Lender, for example, offers banks a dedicated Transformer solution that is tailored specifically to the needs of a large financial institution. Separate editions include:

• Banks
• Credit unions
• Community banks

Each is tailored to the specific business flows and regulatory requirements of different operations and with configurability capable of handling even unique challenges. The key advantages of this solution are:

• Unmatched flexibility which allows for meeting any organization’s automation needs. The solution is adjusted and deployed by the TurnKey Lender team and is supported 24/7 to make sure it’s fully operational at all times.
• Ease of use – the team made sure that the UX and UI design of the system adheres to the latest and strictest standards.
• Security – the system is built in accordance with the OWASP standards and complies with the ISO 27001 (Cyber Security) and ISO 9001:2015 (Quality Management Systems. Requirements) certifications.
• Intelligence – TurnKey Lender ULM solution uses advanced deep neural networks to meld traditional and alternative credit scoring approaches. This results in a new level of credit decisioning accuracy.
• Scalability –  according to an independent analysis by HP, this solution is capable of processing 100 loans a second and more without skipping a beat.

DIGITAL TRANSFORMATION SERVICES FOR A BANK’S LENDING PROCESSES

Fortunately for borrowers, the current industry standard of multi-day lending finalization is slowly being left behind.

Today’s borrowers want a loan decision process that’s quick, accurate and comes with as little risk as possible. If a bank’s lending process fails in one of those elements, they lose out on more potential customers.

And that’s not an infeasible task for a bank. Here’s a case study about digital transformation of lending of one of the banks that use TurnKey Lender:

Commercial Bank in Asia-Pacific Region – TurnKey Lender Success Story

Not only does undergoing a digital transformation make it easier to generate more lending customers, but it also makes life as an online lending business much simpler. From automating debt collection operations to ditching old-school risk assessments, going digital frees up a substantial share of a bank’s financial and human capital.

Particularly in the highly-competitive online lending space, business leaders can use all the cost-cutting and streamlining they can get.

Some of the things you can outsource to your lending automation solution provider are:

• Credit Scoring Audit/Adjustment – digital solutions have plenty of ways to evaluate the creditworthiness of a borrower other than their credit history and credit bureau score. Your lending automation provider should be able to analyze your business and work with your staff to come up with and implement the optimal scorecard.
• Full system integration, testing, and deployment – it’s understandable if you don’t trust any third-party tech staff to even look at your backend. In this case, the solution should be intuitive and professional enough for your in-house experts to customize and implement it themselves. But there should be an option for the provider to do that for you and free you of unnecessary trouble.
• Program Digitization – having put a lot of effort into lending processes streamlining, you can request digitalization of the existing business processes. In that case, it’s important that the software provider and their solution were flexible enough to tailor it to your needs.
• Operations Automation – digitalization isn’t just about the borrower’s experience. Your staff and you should also have your lives improved. So the right ULM solution provider will also automate the operations of your lending program, allowing you to cut costs and improve efficiency.
• Employee Training – new systems, no matter how good and intuitive, should come with staff training to make sure your bank uses the digital lending solution to its fullest.

Digital Transformation Benefits

Thanks to recent innovations in FinTech, it’s now possible to:

•   Automate the loan application process, including leveraging proven and alternative credit scoring models at the same time and get the data-backed results in seconds
•   Seamlessly adopt paperless statements
•   Get credit bureau and bank statement data instantly
•   Digitally track all interactions between lenders and borrowers automatically throughout the life of the loan
•   Automatically update borrower credit bureau information
•   Enable push notifications and other types of high-demand mobile features

These make winning new customers for a bank wildly more attainable since you get the user experience of a digital lender and the reliability brought by a trusted name of a bank. But it doesn’t end there. Some of the other benefits include the abilities to:

•   Cut operational costs
•   Greatly reduce human error
•   Provide instant loan processing
•   Streamline compliance
•   Improve the user experience

And, most importantly, digitalization empowers banks to focus on what they should be concentrating on: continuing to grow their core business in the changed market.

It’s a common misconception that digitalizing a bank’s lending process is far more complex than that of alternative lenders. Bankers often think that it’ll take up to several years and a ton of resources. But the current reality is that providers like TurnKey Lender have sufficient expertise and previous experience with similar companies. This lets us deliver a fully-integrated loan origination or end-to-end lending processes automation solution with reasonable expenses within several months. The solution that would be deployed and integrated with the company’s core banking software, would meet all the requirements, and help you comply with AML and KYC.

Digital Transformation And Customer Experience

Modern customers have become accustomed to, and have begun to demand, a fast and easy-to-navigate experience when they do their online and mobile banking. Funds are sent to friends and family in an instant, fully digital savings accounts can be opened with a few clicks, and paper checks can be deposited with a phone camera.

Everything is online. Everything is instantly available.

People want easy and affordable solutions that meet their digital media expectations – and banks have been racing to please them.

Unfortunately, this has led to a backlog, with lending near the back of the line. Even though cross-bank transfers can be made with a few finger taps, loans are still taking days.

How long do you think borrowers will put up with this?

Right now is a fascinating moment to be a lending business, because there are now innovative new methods of automating and streamlining lending processes.

From the application to funding and servicing over the life of the loan, the entire process can already be completely digital – without a single business day of unnecessary delay.

Final Thoughts

For massive corporate banking giants that have seemingly limitless funds set aside for innovating their customer experience, undergoing a digital transformation on their own isn’t such a risky endeavor. For small-to-medium-sized enterprises, however, the upfront capital and expertise needed to complete a digital transformation is simply out of reach.

If startups want to embrace automation, they often turn to a trusted digital lending partner like TurnKey Lender to take care of their digital transformation.

TurnKey Lender’s end-to-end lending solution enables automation of all loan origination and servicing processes: originating, underwriting, collateral, servicing, collection, reporting, and more.

Safely onboarding your customers and disbursing funds with TurnKey Lending software can be as fast as 5 minutes. Including running all the borrower checks. With a solution like this on your side, your customers will start getting instantaneous loan decisions and automated loan servicing while you reap the reward secured by intelligent credit decisioning and reduced operational costs.

The question isn’t when, but which.

Which banking organizations will embrace instant digital lending solutions and get ahead of their peers before full modernization of lending processes becomes the norm?

Feel free to download our free whitepaper dedicated to TurnKey Lender Transformer for Banks. Learn how we can make digitalization easy for you.

Now, e-lending technology has caught up with the expectations of both the lenders who need to be able to deploy ready-made automation in a matter of days, and possibly even more importantly, the borrowers who require financing when, where, and how they want it. Lending overhead can be reduced or eliminated thanks to automated AI-driven underwriting, origination, and servicing, and collection; and there’s no need for branches maintenance in a world where all the lending-related operations can be done under the umbrella of a single lending management system, fully online.   

And even though lending technology isn’t as cheap e-commerce due to the complexities of credit scoring and numerous business logic options, the credit industry entry barrier got lower than it has ever been allowing a business owner to become a lender powered by cutting-edge software at a fraction of the price.

In this post, we’re looking into the expenses a business will have to spare in order to enter the alternative credit, embedded finance, or traditional lending game.

Of course, the final sum will differ for each lending business type, jurisdiction, and the scale of the launch. We’ll give you a rundown of what you’ll most probably have to spend money on to digitalize your lending business.

Lending processes automation for digital lending

Different lenders have different automation needs. Some only require a module for borrower evaluation, decisioning, and funds disbursement, some need a hand in servicing, some in the collection, and then some need automation of their entire lending process. Arguably, going with end-to-end automation of the lending process using one software solution is preferable since you want all the functional modules and integrations to interconnect smoothly and transfer data in between them effortlessly and without any losses. 

For a lending business, the end-goals of digitalization are:

• Replacing outdated processes with software tailored to any business’ needs.   
• Eliminate unnecessary paperwork throughout the lending process.  
• Reduce operational cost and overhead of running a lending business.    
• Get rid of any human error in the entire crediting process. 
• Reduce the cost and time-to-market of launching an e-lending business.  
• Cutting credit risks, thanks to AI-driven credit scoring.  

In order to achieve that, the perfect case scenario is when a lending business is willing to create their digital presence from scratch rather than build upon a legacy solution as it usually takes an enormous amount of effort to integrate outdated software with an end-of-the-line modern platform and maintain their compatibility in the future. Extracting and moving data from a legacy system may take some time, but in the long run, it’s well worth it. And solutions like TurnKey Lender provide you with ready-made functionality to import data into the system in batches, making up for simpler transition. 

That said, savvy lenders try to get as much automation as they can from a single provider rather than turn to different vendors for separate modules. This way you run lower risks of software failures, databases uncompetitiveness, and system downtimes. Not to mention, getting separate functional modules from different providers will require much more money and will increase the time to market of your new digital lending platform.

Parts of the lending process you will need to automate to run a digital lending business include:

• Loan origination
  • application processing
  • running multiple credit products 
  • loan applications’ management
• Underwriting
  • risk scoring
  • borrower evaluation
  • credit decisioning
• Collateral management (for secured lending)
• Servicing
  • managing the repayment schedule
  • automatically charging installments
  • tracking the repayment of the loans 
• Collection
• Reporting & Analytics
• Borrower communications
• API management & Integrations (more on that later in the article)

As you can see, that’s a lot, but with the right lending automation solution it’s as easy or easier to run than an e-commerce store. Here’s what the basic loan lifecycle looks like in TurnKey Lender. But keep in mind, that for Enterprise clients, our software is capable of incredibly complex and unique flows configured in the no-code platform by our expert team. 

Now, the problem here is that the vast majority of lending automation providers don’t have a wholesome system that you can just plug in and work. More commonly they focus their efforts on some particular aspect like risk evaluation or servicing. At TurnKey Lender went another way and took our time to create a modular all-in-one solution. This way with us lenders can choose either variant:

• Get an end-to-end solution to automate every step of their lending process with us
• Just get a module they need (origination, servicing, collection, etc)
• Get the module they need and then upgrade to implement new functionality from our system

The final price depends on the type of lending operation, the size of the business, the amount of required system customization, and other influencing factors. You can reach out to our sales staff for a quote or get a free trial to see for yourself exactly what we can do for you.

We have been working with lenders for several decades now. We know their pains and needs. To address them, TurnKey Lender team came up with an innovative pricing model in which the final amount depends on the number of loans customer issues with the software rather than a flat fee. This way the company stays invested and highly motivated to help every client achieve better results and help their business succeed.

Keep in mind, that with products this complex, if someone tells you the exact price right away, it usually means that their margin is so high that it has the maximum possible customization included into the price they charge you even if you don’t use it.

Lending-related paid integrations you’ll need

Credit bureaus – If you already have a lending business up-and-running and just want to go digital, you already have access to data from one or more credit bureaus. But for a completely new lending operation, you’ll need to research your market and get access to credit bureau data to use in your credit decisions. Of course, many digital lenders rely on alternative borrower evaluation approaches, but most still factor in credit bureau data into their decisioning process to improve accuracy.

Needless to say, different jurisdictions have different credit bureaus and the price of the plan will depend on the amount of data you’ll need, detalization, accuracy, number of requests, etc.

Payment providers– In order to achieve a truly digital experience for your users, you will need seamless integration with a modern payment system like Authorize.NET, PayEasy, or PayPal. This will let you put collection and payment processing on autopilot which otherwise would be rather daunting tasks.

SMS/Email systems – a system like TurnKey Lender comes with all the functionality required for effortless email and SMS communication built-in. But you will still need to get integrations with providers like BulkSMS, ActiveCampagin, Mandrill or Gmail in order for it to actually send out notifications to your borrowers (or potential clients).

Bank account verification and statement providers – Digital lenders are on constant lookout for agile, reliable, accurate, and intelligent borrower evaluation approaches. Observing the performance of our clients, we’ve noticed that even in the pre-corona economy it was a lot safer and more profitable to utilize both traditional and alternative borrower evaluation approaches. And in today’s digital space, on-the-fly bank account verification and bank statement scoring are a must both from the usability perspective and as means of improving the accuracy of credit scoring based on real-time financials of a borrower.

E-signatures – to ensure proper online document management, you’ll need to get your lending platform integrated with e-signature software like Adobe e-Sign, SignNow, or eSignLive, which in most jurisdictions is also important in terms of regulatory compliance.

Staff expenses of a digital lending operation

Even though automation of lending comes with a drastic reduction of expenses compared to a brick-and-mortar operation, you will still need people to oversee the system.

For example, our AI-powered algorithms can automate the origination processes fully without the need to involve people in risk evaluation or credit decisioning. But generally, lenders still prefer to have a real person making the decisions.

Put real simple, it goes something like this:

the system analyzes all the data and evaluates all the risks and then presents your underwriter with an easy-to-understand interface where they have all the data to make a credit decision within seconds. Then they either decline an application, approve it and send it further in your business workflow or request additional data from the borrower.

To cut a long story short, you will need far fewer people on your staff, but there will still be staff expenses.

Web presence for a digital lending business

Now that we’re done with the part of expenses related strictly to lending, let’s go over the other things a successful digital lender has to pay for to build a decent online presence.

Website – a digital lending business begins with a website. That’s the first thing that meets the potential client’s eye and you want to make a good impression. Because the thing with digital lending is that the borrower doesn’t even need to go across the street to strike a deal with a competitor. Rival’s website is already opened in the very next tab.

So if you’re on a tight budget, you may get a ready-made website template and fill if with content yourself. Of course, this way your expenses can be as low as $70 for a website template, $100/year for hosting and $10 for a domain name. But that’s not the look and feel a reliable digital lender wants to convey. So if you can, consider investing in a proper website.

Design and development – investing in the design and development of a custom website may seem like an overkill, but that’s the 101 of making a memorable brand. The competition out there is fierce so you need to stand out.

Marketing – build it and they will come doesn’t work with digital lending. Even with superior user experience and competitive interest rates, you need to invest in copywriting, ads, SEO, email marketing, and other kinds of online promotions. Marketing can be expensive but it’s also extremely important. Especially in the beginning, until you gain traction and achieve brand recognition. So consider hiring an experienced specialist/team to get it done right. No one wants to have an awesome product that nobody can find online and use.

Final thoughts

In our experience, these are the most important and costly things every newcomer to the digital lending industry faces. And even though it may seem overwhelming at first, in reality, it’s incomparably easier and cheaper than running an old-school brick-and-mortar lending operation.

After all, the biggest and the most important thing for today’s lending business is the lending automation software it runs on. And with TurnKey Lender’s AI-driven decisioning and smooth adjustable workflows, your operational efficiency grows on average by 283% and portfolio profitability improves by an average of 65%. So if you’re not decided yet on the lending automation platform you’re going to use, reach out for a free trial and a demo. We’ll be happy to show you what we can do for you.

Digital lending ain’t easy. But with TurnKey Lender, you lower the risks and increase the returns.

With banks losing their grip on the levers of lending as a consequence of this leveling, other organizations — from pizza parlors and doctors’ offices to community-development funders and capital-equipment providers — have stepped up to provide credit to their customers directly, efficiently, and securely.

Learn about the capabilities of TurnKey Lender Platform for streamlining any kind of embedded finance operations

In particular, many businesses and other groups have discovered they’re best served by one of two established financing models.

• Buy now, pay later (BNPL)

This loan divides a purchase into multiple equal payments, with the first payment typically due at the point of purchase. BNPL goes back to 1800s America as a way for cash-strapped consumers to make payments on relatively big-ticket items like furniture and farm machinery — and, unlike the classic “layaway” plan, they get to take possession of the object in question before it’s paid off.

• Merchant cash advance (MCA)

As a form of “business factoring,” an MCA is a lump sum that’s exchanged for a fixed percentage of the borrower’s sales receipts, with daily payments made over periods, typically, of less than two years. Often structured as a sale of future revenue cleared and settled via credit and debit cards, MCAs aren’t technically loans, but investments.

While garnering more and more attention in the marketplace, these digital-lending models still help businesses stand out from their competitors in a field with lots of room for growth and innovation.

“But configurability is a must” for success in direct lending, warns Elena Ionenko, co-founder and COO of TurnKey Lender, a financing-technology pioneer with operations around the world. “For BNPL and MCA providers to make credit available to customers without taking on too much risk, they need hyper-flexible origination, no-code configurability, and a credit ‘decisioning’ engine that can sort through large datasets to determine first if financing should be granted, and second what rates and other terms make the most sense on a case-by-case basis.”

Buy now, pay later considerations

BNPL providers tend to fall into one of two categories. 

1. Organizations that want to keep collections in-house
2. Those that wish to be a BNPL provider for a specific industry in full confidence they can offer better decisioning, better origination, and a better user experience

The trouble is many third-party e-lending providers — who don’t share your understanding of your customer base — render lending decisions that are too harsh, too lenient, or unsuited to the needs of the niche you’re targeting. These shortfalls can expose you to unwarranted risk either way. 

Luckily, there’s a better alternative for companies in both camps. 

“With TurnKey Lender, businesses that want to keep origination and collections together in-house, and businesses that need customization to serve a particular niche — whether that’s in reference to a niche business catering to a particular industry or businesses whose consumer-oriented customers have particular needs — can leverage the power of artificial intelligence,” says Ionenko. “Coupled with configurability that doesn’t require coding and interoperability with system software, TurnKey Lender’s AI sets the standard for truly independent lenders.”

Merchant cash advance considerations

Merchant cash advance solutions are especially attractive to gig workers, who, like some app-based workers — think Doordash or Lyft — seek a degree of income predictability. In such cases, MCAs make perfect sense to workers and app providers alike.

TurnKey Lender’s MCA software:

• Unifies all MCA-management tasks in one software solution
• Renders MCA financing on terms that are calculated moment by moment  using industry-leading AI
• Eliminates redundant paperwork
• Trims operational costs 
• Puts collections on autopilot, sharply reducing the potential for human error

Financing application workflows are based on MCA use cases and suit the key verticals of the merchant cash advance industry, whether with gig-workers or large merchants. 

An MCA applicant describes their business, income structure, and any other relevant details required for making an informed decision on the business performance in the future. This information is then used to determine the advance amount and the profits’ percentage to be charged on a daily, weekly, or monthly basis. 

In addition to streamlining income for gig-economy workers, MCA providers get a built-in decision engine that leverages proprietary machine learning algorithms and deep neural networks to process real-time and historic bank statement data in addition to a configurable array of alternative (and largely behavioral) scoring inputs. Big data and AI ensure speed and accuracy in risk evaluation and finance decisioning.

More choices for digital-era customer financing

The AI use case for MCA providers doesn’t end there, however. With analytics derived from underwriting criteria as well as performance and behavioral data,  MCA providers can extend multiple offers that take stock of rates, remittances, and repayment schedules. 

We’ve mentioned that, because innovation is a constant in financial technology, a hosted software solution makes sense for MCA and BNPL providers alike. After all — 

• Build it yourself, and you’re stuck with what you’ve got, with the R&D staff and budget needed to keep up with enhancements likely out of reach
• Outsource to a lending-service provider, and you’re relying on a business model best served by holding off on updates and improvements
• Meanwhile, a lending-as-a-service provider like TurnKey Lender knows there’s nothing to hide behind when the tech isn’t at (or beyond) the prevailing industry standard 

Bottom line, organizations that provide either BNPL or MCA financing can run the leanest, most responsive, and most efficient operations using an embedded software solution,  according to TurnKey Lender’s Ionenko. “The only question — and this is where we can provide guidance — is whether it makes more sense to choose our Transformer or our Standard platform,” she says.