Payment service providers become the allies of the new breed of online businesses


This article is brought to you by Retail Technology Review: Payment service providers become the allies of the new breed of online businesses.

New research[1] launched at Money20/20 by embedded finance provider, YouLend, highlights the shift in how SMEs that trade online are accessing the funding they need.

Central to this transformation is the change in who businesses see as their key partners.  Taking over from banks, payment service providers and website/webshop providers are ranked as the most important business partners by SMEs. In this role, they are well-placed to provide access to finance as part of a merchant’s normal transaction flows.

“What we see from this new research is the changing of the guard when it comes to business relationships – and the importance of the new partners as a route to the capital needed by online merchants,” said Mikkel Velin, CEO of YouLend.

Key data

  • 43% of businesses need funding to cover day to day running costs
    • 34% to buy equipment
    • 32% for materials/supplies
    • 21% to cover staff costs
  • A fast response is critical for 43%
  • Yet, using traditional providers 44% waited up to 7 days to receive funding
  • Payment service providers rank as the most important business relationship for 41% of SMEs
  • Website/Webshop providers and suppliers, both at 37%, come ahead of the Bank (34%)

“Payment service providers and website/webshop providers are well-placed to offer an embedded finance solution at the point where merchants need financing,” continued Mikkel Velin. “They understand their merchants well. And they can deliver a seamless experience because they have robust, real-time data on merchants’ trading activity which can be used by an embedded finance platform like YouLend to make tailored, finance offers in minutes rather than days or weeks.”

The research, published in a white paper: ‘Embedded finance: The hidden enabler in commerce’, shows that the reliance by traditional lenders on credit bureau information is not in tune with the current trading and growth trajectory of modern SMEs with the result that the rejection rate for SMEs that have been trading for less than 2 years is 3 times higher compared to all businesses[2]. The repayment model of traditional business lending with fixed repayments also gives SMEs cause for concern with 27% experiencing sleepless nights due to repayment pressures.

There are also fears about committing to long-term repayments at a fixed rate (42%) and missing payments in a downturn (41%). As a consequence the research found that 44% would be interested in flexible payment options, such as having the ability to pay more during more profitable times, and less at more challenging times.

“Our focus is on giving leading e-commerce platforms, tech companies and payment service providers the ability to offer their customers rapid funding through our technology platform,” concluded Mikkel Velin.  “The precise risk calculations and automation mean capital can be extended to merchants, with offers being made in minutes.  And, crucially, the financing is repaid directly from merchants’ sales, thereby helping small businesses manage cashflow effectively.”

[1] 500 Senior Decision Makers in businesses trading online, with 1-100 employees were surveyed by Censuswide, July 2021. Censuswide abides by and employs members of the Market Research Society which is based on the ESOMAR principles.

[2] British Bank Survey, 2020

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