Embedded finance involves placing financial services directly within the everyday platforms that users already trust and use.
According to Jakob Pethick, Chief Commercial Officer at YouLend, this concept is becoming increasingly relevant for small businesses across various sectors, including e-commerce, retail, services, and notably, hospitality.
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“Embedded finance is highly beneficial for small businesses,” Jakob explains.
“Businesses operating on platforms such as Booking.com, Just Eat Takeaway.com, and Deliveroo consistently rank amongst those with the highest demand for embedded finance across the US, UK, and the EU.”
The driving force behind this trend in the hospitality industry is its sensitivity to economic fluctuations, including changes in consumer spending and seasonality.
Jakob highlights findings from the latest Hotelier Survey by Mews, a pan-European hospitality POS partner:
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By GlobalData“30% of hoteliers are hindered from increasing non-room revenue due to a lack of capital. Traditional financing institutions often struggle to serve these businesses, prompting hospitality platforms to develop bespoke financial services either independently or in partnership, making them easily accessible to their users.”
Success stories in embedded finance
Jakob shares several examples of successful embedded finance implementations in the hospitality sector.
“YouLend-backed SMEs in hospitality have reported, on average, a remarkable 26% increase in sales within six months of receiving funding, alongside the addition of one new job to their workforce. Embedded finance has become a crucial lifeline for businesses to grow and thrive,” he says.
This success underscores the critical role that embedded finance plays in supporting small businesses. It provides them with the capital needed to manage cash flow, address seasonality, and make day-to-day operations and investments smoother.
The future of embedded finance
Looking ahead, Jakob sees embedded finance evolving significantly in the hospitality sector over the next few years.
“Both small businesses and their platforms are expressing tremendous demand for our product. Small businesses often struggle to access financing—it’s either very slow or they can’t get it at all. Meanwhile, hospitality platforms are increasingly looking to solve the financing problem for their underlying business customers to support growth and secure loyalty” he says.
Jakob anticipates that embedded finance will become even more common and deeply integrated.
“Platforms want to make the application and repayment process even more seamless for their customers. We expect to see more specific financing use cases, such as financing being available when a merchant is checking out online. We are just scratching the surface of how we can place financing solutions into the hands of every small business around the world,” he says.
Enhancing guest experience through embedded finance
When it comes to leveraging embedded finance to enhance the guest experience, Jakob highlights the traditional challenges hotels face in obtaining working capital.
“Traditionally, working capital is difficult to obtain due to the lengthy process and paperwork. Many smaller boutiques or home properties are also perceived as high risk due to the seasonal nature of their business.”
The main challenge for businesses in the hospitality sector is financing a refresh or scaling up operations.
“Those who run a hospitality establishment know how important it is to periodically rejuvenate the business—renewing the decor, hiring staff, updating the menu, acquiring new equipment, or trying new business strategies such as expanding the premises,” Jakob notes.
This is where YouLend’s financing can make a significant difference. “Our financing solutions can help supercharge the business, giving them the capital needed to grow and satisfy their customers.”
