In today’s constantly shifting economy, the best strategy for both lenders and their merchants is preparedness. When the cost of capital is low, it means that borrowing money is relatively inexpensive, which allows access to funds more easily and at a lower cost. With more affordable capital, merchants can seize growth opportunities, provide more diverse offerings, and ideally increase their customer base—which in turn grants lenders access to a more diverse portfolio and applicant pool. On the other hand, when the cost of capital is high, borrowing money becomes more expensive, which limits financing options for consumers. This can put a strain on merchants’ business, making it more challenging to invest in growth initiatives.
In such a scenario, having diverse and intentional go-to-market strategies becomes crucial. Instead of solely relying on borrowing to fuel growth, merchants need to explore alternative strategies to expand their customer base, increase sales, and improve profitability. Financial institutions like yours have a unique opportunity to support your small business customers in the face of fluctuating markets by offering cutting-edge financial tools and technologies that support their go-to-market efforts.
One such tool is an embedded finance program, which in addition to its lender-centric benefits, represents a powerful avenue for merchants to offer borrowing options and in turn enhance customer experience, and drive revenue.
As a financial institution, providing personalized support to your merchants is the best way to empower them to unlock the full potential of your embedded financing program, supercharge their go-to-market strategies, and transform them into loyal and lasting customers.
Read on to learn techniques to empower your merchants to get the most out of their embedded financing programs.
- Invest in merchant education and training:
One way to ensure your merchants get the most out of their embedded financing program is to educate them. ‘Knowledge is power,’ as the adage goes, and lack of knowledge is a leading cause of poor merchant utilization. Educational resources should cover various aspects of embedded finance programs, including how to optimize financing options, how to utilize the platform, and how to harness platform data to develop innovative and effective go-to-market programs.
By equipping merchants with the necessary knowledge and skills, financial institutions can help their partners make informed decisions and maximize the benefits of embedded finance for both organizations. Additionally, ongoing education and training should be offered, as technology and financial trends are constantly evolving. This helps keep merchants abreast of new developments and best practices in the field and supports them in their continuous effort to better serve customers.
- Extend your reach to the customer’s customer:
The merchant isn’t the only constituent in an effective merchant success program. To truly empower merchants, financial institutions must extend their support to the end customer. One way to do this is to provide merchants marketing materials and out-of-the-box programs that grow demand and strengthen customers’ confidence in the available financing options. These informational strategic materials lower the barriers to adoption and make it easier for merchants to educate customers on the benefits of the program.
Data also has an important role to play. By providing useful customer data to your merchants, you can support them in better understanding their clientele’s needs and preferences, and adapt their strategy and offerings accordingly. This same data can be utilized to strengthen and diversify your financing options.
For example, an uptick in home improvement loan origination coupled with record high home equity may signal the opportunity to offer Home Equity Lines of Credit (HELOCs) to your home improvement merchants. By expanding and tailoring offerings to customer needs, lenders can enhance customer-product fit and, by extension, adoption.
- Treat merchants as individuals:
Merchant success is directly correlated with product fit, so make sure to tailor your embedded financing program to each merchant’s products and services, customers, sales cycles, and business goals. One way to do this is to use targeted metrics to aid in matching your merchants with the correct business banking options. Beyond the initial program set-up, you can utilize data from your embedded finance platform over time to offer personalized financing options for merchants based on their history, products, transactions, business size, and more.
In some instances, multiple forms of financing are optimal for a merchant. For example, HELOCs might be used in combination with unsecured lending and even credit card programs. These varying loan types offer their own advantages, which may resonate with different customer segments based on their preferences and needs.
- Reward progress and utilization:
A great way to energize and excite merchants to get the most out of their embedded lending solutions is to offer incentives. Financial institutions should introduce rewards programs to merchants who are actively utilizing their embedded finance programs.
By offering exclusive perks and incentives for merchants who demonstrate strong program utilization and a steady volume of loans, institutions can foster a culture of engagement and loyalty among merchants. Rewards can take various forms, including cashback incentives, discounts on financial products, or access to exclusive resources and networking opportunities. By incentivizing desired behaviors, financial institutions can encourage merchants to fully leverage embedded finance programs to achieve their business goals.
- Keep the conversation going:
Effective communication is essential to the longevity of successful partnerships, and your relationship with your merchants is no exception. Financial institutions should maintain proactive communication channels with merchants, providing regular updates on new features, product enhancements, and industry trends to keep them informed and engaged. Regular touch points boost utilization by keeping your brand (and embedded lending platform) top of mind.
Emails and other written communication channels are just the beginning. Dedicated customer support resources, including relationship managers who can offer personalized assistance and in-depth knowledge, should be available to respond to ongoing merchant questions or concerns. Additionally, periodic face-to-face meetings can further strengthen relationships and foster trust between institutions and merchants. By staying connected and responsive to merchants’ needs, financial institutions can build lasting partnerships that drive mutual success.
Empower your merchants with LoanStar
Embedded finance represents a lucrative opportunity for both merchants and lenders looking to unlock new opportunities in today’s digital economy. Financial institutions play a crucial role in enabling their merchants to harness the full potential of their embedded lending program. By providing personalized support, investing in education and training, and focusing on merchants’ specific needs, institutions can empower merchants to drive growth and enhance profitability.
The first step to supporting merchants is partnering with a supportive platform provider. Your embedded lending provider should deliver a configurable experience that can be tailored to the needs of your merchants and demonstrate a commitment to merchant education and success. Look for a partner who recognizes merchant engagement as a critical success factor for program success and considers your merchant engagement efforts an extension of their offering. At LoanStar, we’re committed to supporting our lenders and merchants in maximizing the benefits of embedded lending through our powerful MerchantLinQ platform and collaborative, customer-centered partnership.
Contact us today to learn more about how we can help you help your merchants, enabling you both to maximize mutual value in your embedded lending program.
