Gen Z and millennial consumers are especially likely to use embedded lending.

According to a report by Pymnts, a platform for innovation in payments, on Thursday, embedded lending, which is an aspect of embedded financing is already reshaping how consumers and smaller businesses access credit through its convenience and flexibility.

According to Stripe, embedded lending enables digital platforms to offer financial services, such as loans, without sending their customers off the platform to access them. The global embedded finance market is expected to reach nearly $385bn by 2029, rising at a compound annual growth rate of 30 per cent.

“Lenders recognise the transformative potential, but they also recognise implementation challenges that could get in the way. Consumers are turning to embedded lending more for essential expenses like groceries and bills, our data finds. This usage trend spotlights embedded lending’s developing role as a practical solution for managing cash flow gaps. Gen Z and millennial consumers are especially likely to use embedded lending. They are particularly likely to switch to providers that offer attractive embedded lending products,” the report partly read.

It also stated that micro, small, and medium enterprises, embedded finance can serve as a key support for handling many operational and growth needs.

“SMEs that try embedded lending are more likely to prioritise it in the future, data shows, suggesting that experiences with the products tend to be positive and emphasising the potential importance of first impressions in fostering loyalty.

“Embedded finance offers lenders a meaningful opportunity to grow their revenue and reach new customers, particularly in the underserved microbusiness market. To do so, they must invest in technology and infrastructure to offer compelling embedded lending solutions. Challenges such as compliance, scalability, and third-party integration must be navigated to unlock embedded finance’s full potential,” the report concluded.

A similar sentiment had been echoed by the Managing Director/Chief Executive Officer of Sterling Bank, Abubakar Suleiman, at a recent event where he noted that embedded banking was the way to go.