ConnectPay, an all-in-one financial platform, has partnered with Softloans, a white-label embedded lending solution, to power an automated loans solution for platforms and other businesses, allowing them to integrate revenue-based financing (RBF) for their e-commerce merchants. The solution has just launched in the Lithuanian market and companies are currently working on expanding the offering to other markets.
Tapping into the billions-worth market
In Europe alone, the revenue generated by the eCommerce market is expected to reach 902.22 billion US dollars by 2027, which would be a whopping 42.78 percent increase from the 2023 market valuation (631.89 billion US dollars). However, over 50 percent of eCommerce merchants – SMEs in particular – lack working capital to capitalize on this market opportunity.
This is where lending services could fill in the gap. For instance, an eCommerce merchant that wants to scale may have the expertise to do so but lack funds to support key success factors, e.g. marketing campaigns. In such a case, Softloans’s solution would enable a merchant to secure financing and lock in the necessary resources. This creates a mutually beneficial environment as the more a merchant grows, the more its partners gain.
“For platforms, this is a great opportunity to disrupt the market and support their merchants,” said Audrius Griškevičius, CEO and co-founder at Softloans. “RBF allows for a faster funding timeline, which ultimately translates to ideas coming to life faster, seeing what works, what doesn’t, and enabling merchants to refine their growth strategy for it to deliver the best results.”
Embedded finance as a core pillar
Just a few years ago, providing automated loans required platforms to do extensive manual work — collecting data about the customer, evaluating creditworthiness, agreeing on a repayment schedule, etc. Leveraging AI enabled Softloans to automate most of them, greatly reducing friction for clients. However, this became possible only after ConnectPay externalized onboarding and various payment methods via APIs, providing the ability for their customers to tailor these processes based on their use case.
“This plays a critical role in enabling fast merchant onboarding and seamless transactions, which is paramount for embedded lending to function effectively,” commented Griškevičius.
While it seems that there are similar RBF services in the market, they differ substantially when it comes to supporting business versus retail clients. Moreover, not all have the expertise to navigate their clients through the red tape and introduce them to the complex world of banking and finance. This is where ConnectPay fills in the gap; having extensive regulatory expertise, the company supports Softloans in bringing the market a product that removes regulatory complexities and other risks for platforms of any kind to help their eCommerce merchants.
“The partnership complements our offering by bringing corporate client support to an existing individual use-case offering. This means we can now support the full breadth of businesses that would like to offer financial services to individuals, corporate customers or, like in most cases – a mixture of both,” says Marius Galdikas Chief Executive Officer at ConnectPay.
Stronger alignment with compliance
Galdikas also noted that there has been a surge of crowdfunding lending businesses that are used to serving the market by using dedicated escrow accounts. According to the expert, the needs of the customers have long outgrown this model. In fact, it may even lead to increased risks and non-compliance in relation to PSD2 requirements, as the clients’ funds are not safeguarded in the case of the platform going under.
“Softloans pushed us to expand our offering to include corporate onboarding and corporate virtual card management via APIs, which can now be used in serving a multitude of other use cases,” Galdikas commented. “In the end, we have a solution that offers fast and reliable onboarding for clients without any compromises related to compliance.”
ConnectPay plans to continue investing in collaborations that could leverage their payment and API capabilities to enhance their offerings. A few months back, the company also announced a partnership with Velmie, a white-label banking software provider, allowing it to offer an end-to-end banking solution, which helps expedite new financial services launch reducing the timeline from years to days.