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Embadded landing

Fuelled by the power of embedded finance, embedded lending is pushing the boundaries of SME funding to new frontiers. Mikkel Velin, Co-CEO at YouLend, explores the trends shaping the future of borrowing and what this means for the lending industry in 2022.

Embedded lending is booming. Over the past year, we’ve seen huge numbers of retailers offering lending services to consumers with new buy-now-pay-later (BNPL) offerings providing a much-needed boost to spending in the sector.

On the other side to consumer financing, a parallel trend has emerged rapidly in the B2B space in the UK, with e-commerce platforms and payment service providers (PSPs) from outside of the traditional finance sector, lending directly to their business customers. In 2022, the prevalence of embedded lending, which is still ripe for the taking in Europe, is predicted to surge across the region as SME demand for finance continues to grow on a global scale.

This will bring many benefits. After all, it’s high time that small businesses across Europe were offered alternative avenues to accessing credit. Traditional, bank-based lending is plagued by low approval rates, slow decisioning, poor service and bad onboarding experiences. New players have an opportunity to leverage their technology capabilities to offer excellent service offerings to their merchants, and benefit from those strong customer relationships.

Co-CEO at YouLend

Mikkel Velin

With this in mind, it’s clear that embedded lending will continue to have a profound impact on the future of borrowing. But what, specifically, can we expect to see in 2022?


1) Collaboration will be key to survival

In a competitive landscape, simply staying in your lane is not enough. The catch-all phrase ‘everyone’s a fintech now’ certainly has some truth. But in 2022, firms who aren’t already offering critical ancillary services to customers will have to reconsider their approach in order to stay ahead of their rivals.

Embedded finance technology allows firms to build directly on the foundation of their future growth. Doing business in the digital age is about enabling your customer community to grow alongside you. With embedded lending, when the business customer grows, you grow. In this way, embedded lending has the power to elevate, not eliminate, players across the broader ecosystem.

2) BNPL will open the door for growth in the B2B space

One embedded lending trend that we’ve seen experience rapid growth and success is BNPL, enabling consumers to buy goods on credit and pay for them within a set period after the point of sale.

But we are only just beginning to scratch the surface when it comes to B2B – which is surprising considering the scale of the opportunity at hand. Estimated to be over five times larger than the B2C market, B2B SME lending in Europe remains antiquated and ripe for transformation.

As companies and consumers gain more and more confidence in the technology that underpins rapid access to funding, opportunities to utilise embedded finance across multiple sectors will continue to snowball in 2022.

3) eCommerce platforms will overcome traditional hurdles to offer financing

Whilst the huge growth of BNPL has been well documented, lesser known is the rapid growth of eCommerce platforms offering lending solutions to their business customers in the UK. Via embedded lending, challenges that have prevented other market players from becoming lenders in the past, such as building capital and having strong economies of scale, can be sidestepped.

Thousands of SME customers are now accessing credit via e-commerce platforms, such as eBay, as a source of funding. Revenue-based financing provides a flexible alternative to fixed amortizations offered by many traditional banks; access to more data to assess credit risk means loans can be approved much faster.

The result? More customisable, accessible, and cheaper sources of funding for SMEs whilst avoiding the lengthy processes to determine creditworthiness, expensive fees, and high interest rates that so often come with traditional lenders. Flexible risk models allow a much wider pool of merchants to be approved for financing, mirroring the success of micro-financing in bringing growth to a sector often overlooked by banks.

Therefore, it’s no surprise that in 2022, the uptick of e-commerce platforms offering embedded financing options in the UK will continue to boom while European players start to wake up to the opportunity.

Whilst each of these trends are influencing traditional lending structures in their own way, they are also working together. At the centre of all three lies the harnessing of data and technology to create a better product and customer experience. Certainly, invention isn’t always needed for innovation. Rather than reinventing the wheel, there’s tremendous value to be had in taking stock of what exists already to find a better way of doing things.

Those that recognise this and act upon it to seize the embedded lending opportunity at hand will be the ones to not only survive but thrive in 2022. I for one am excited to see how the lending industry will continue to evolve across the UK and in Europe in the new year – and beyond.



Netflix-style ransomware makes your organisation’s data the prize in a dark subscription economy




By John Davis, UK & Ireland Director, SANS Institute.

Today’s subscription economy makes accessing nearly any service as easy as hitting enter. The same model has now entered the dark web. The same Netflix-style instant-access menu is now part and parcel of the online criminal’s lifestyle. Ransomware-as-a-Service (Raas) is opening up the hacking talent pool, giving amateurs access to sophisticated ransomware toolkits – a plug and play option that has seen hackers run rampant.

Once ad hoc acts were committed by hackers using simple phishing attacks to gain entry. They have now become complex and targeted, using the latest purchasable ‘toolkits’ allowing any dark actor to get a slice of the ransomware pie by simply subscribing to a ransomware toolkit.

A growing proportion of ransomware attacks are being carried out using the RaaS model and it is clear that the toolkit creators and their customers are cashing in. So, what can organisations do to ensure they aren’t victims of these cookie-cutter attacks?

Sophisticated criminal service providers

RaaS providers sell their services using sophisticated business and marketing strategies to appeal to hackers wanting maximum return for minimal effort. These providers operate in the grey zone between legal and illegal, marketing themselves on the dark web; they appeal to criminal clients interested in purchasing a single attack or even maintaining a retainer-style relationship for ongoing attacks. The client can pay a monthly fee for advice and assistance, usually in cryptocurrency. Like the best subscription providers, this can even include around-the-clock support that covers technical aspects of an attack and matters such as negotiations with a victim. The client also may share a portion of any payment extracted from a victim with the RaaS provider.

John Davis

The RaaS model makes attribution of attack difficult but not impossible. In some cases, there are elements, such as snippets of malicious code, that can help authorities trace an attack back to a perpetrator known to be running a RaaS operation, and attackers, when caught, may give up relevant details.

RaaS providers sell expertise and prefer keeping the client at arm’s length to avoid detection and prosecution. Indeed, it can be harder to prosecute RaaS than conventional ransomware attacks because there are more moving parts, and they may move in several jurisdictions governed by competing laws and authorities. The advent of RaaS and ransomware, generally, have increased the impetus to harmonise laws and foster law enforcement cooperation in this area.

Cloud gives and takes

RaaS providers are taking advantage of IaaS (Infrastructre-as-a-Service) and the economics of cloud-based computing and storage the same way legitimate businesses do. The participation of most IaaS companies is usually unintentional. The desire to maintain their clients’ data security and their own reputations makes legitimate IaaS providers a formidable ally in the war against ransomware and RaaS providers.

Just as in legal, and commercial undertakings, ransomware skills are continually honed, and standards are elevated through competition. As RaaS providers raise their game, the stakes for potential targets are also raised. The threats they face will be more acute, at least until cybersecurity professionals and law enforcement raise their game and improve their methods for combating threats. Similarly, organisations that find themselves on the wrong end of an attack are not helpless.

Resisting the rise of RaaS

As the risk of RaaS attacks increases The Centre for Internet Security has shared a series of Critical Security Controls that should go a long way to fending off RaaS and other types of ransomware attacks and to mitigating damage should one occur. These include:

  • Taking inventory of all electronic assets. Take stock of all fixed, portable, or mobile devices that can connect to your technology platforms. This will allow you to spot any unauthorised or unmonitored devices and remove them or make them secure. Do the same with software assets, including operating systems, programs, and apps. Review credentials and permissions for each employee, and limit access to files, folders, apps, programs, and external websites to those that are appropriate for their duties.
  • Monitoring access points. Your infrastructure is most at risk of a breach at the points where it meets the outside world. Enhance malware detection and defence techniques, focusing particularly on these points and the means through which a breach is most likely to occur, such as web links and emails. This, plus a rigorous permissions regime, could prevent a considerable expenditure of time and money if Dave from accounting decides to click on the wrong Pornhub banner ad when he is supposed to be processing invoices.
  • Anticipating vulnerabilities and responding to threats. Use industry resources to stay aware of the latest threats and ensure that your operating system and other software are updated, and patches applied when available. The most significant vulnerability is reusable passwords. Most financial services now require Multi-factor Authentication for login. Using this simple form of MFA stymies over 99% of all phishing attacks.
  • Making the most of your human assets. If properly trained your employees can be an additional factor to aid in thwarting attackers. Their understanding of and reaction to ransomware attacks and other threats should be evaluated and sharpened through the development of security awareness programs that work to change user behaviour when presented with a bogus email or web page. There should be simulations of threat scenarios to put these procedures and preparations to the test.
  • Investing in your security team’s skills and tools. There is a lot of concern about a “cybersecurity staffing shortfall,” but successful security organisations have found that there is more of a skills gap than a headcount shortfall. By upskilling security analysts in critical areas such as cloud security, purple teaming, and machine learning, you get a double benefit: the need for additional staff is reduced, and surveys show that security staff that get regular training are less likely to jump to another company for a salary increase.

Continual proactive protection

The RaaS model only increases the likelihood of an attack, making it a feasible option to a broader population of bad actors. There is now no choice but to take proactive steps to protect against this genuine threat, continually evaluating the threat backdrop and monitoring systems and people. When it comes to a potentially business-breaking attack, it’s increasingly not a question of if but when.

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By Alex Kwiatkowski, Director of Global Financial Services, SAS.

From shifting market dynamics and mounting geopolitical tensions, to skyrocketing cyber threats and a worsening climate crisis, the world faces risk and uncertainty on many fronts.
But how are these and other prevailing trends reshaping the financial services sector?
A volatile landscape  
Describing the past few years as ‘volatile’ could be seen as a slight understatement, akin to saying the Titanic had a minor mishap at sea or that Liz Truss’s economic policy was mildly unorthodox. From the COVID-19 pandemic, Russia’s despicable invasion of Ukraine and the increasingly intense impacts of climate change, the resilience of not only businesses but whole nations has been pushed to breaking point.
In many ways, the banking sector has proven remarkably resilient to such challenges and risks. In the face of prolonged disruption, profitability remained higher than many had anticipated. However, the deeper structural challenges, such as digitalisation, the emergence of fintech disruptors, the brouhaha over crypto, and the growing threats associated with cyber attacks, are continuing to gather force as we head into a new year.
A recent Economist Impact survey, sponsored by SAS, found that while banking leaders are conscious of the imminent risks and those on the horizon, many are generally optimistic about how their organisations could be reshaped over the next decade, and beyond. I believe this optimism is well-founded rather than misguided, although pragmatism is required.

Alex Kwiatkowski

Digital transformation

For some years leading up to the COVID-19 pandemic, banks had been wrestling with exactly when and how to digitally transform. Like so many other industries, the chief legacy of the pandemic was to force rapid and wholesale change on a sector not always eager to embrace new ways of operating.
Traditional banks are now on track to be digitally transformed by the end of this decade, with technologies such as cloud computing and AI becoming industry norms. When considering the next three to five years, 57% agreed that digital transformation is among their top strategic priority. Cybersecurity and data protection (55%) are not far behind.
This focus on digital transformation is understandable, given the opportunities it may bring. Respondents from the Asia-Pacific region were the most excited, with 64% selecting it as among the greatest opportunities for their organisation. This was much higher than their counterparts in North America (52%), Latin America (50%) and Europe (50%). In fact, the tech-savviness among Asian consumers has created an opportunity for banks to leap ahead in delivering innovations compared with other regions.
When asked about the role of advanced data analytics in a successful digital transformation, just under half (48%) of executives selected this as the most important digital capability that their organisation must harness. It was the clear overall favourite, followed by blockchain (35%), AI/machine learning (34%), IoT/5G (33%) and robotic process automation (29%).
However, the survey also revealed a number of hurdles that may prevent the full uptake of data analytics, such as the increased risk of cyber attacks and a reliance on legacy technology systems. In addition, functions and departments working in silos was viewed as a potentially significant barrier, with 48% noting this as a “significant barrier” to change.
Purpose-driven banking
Alongside this goal of digital transformation, a growing consensus has emerged among banking leaders that the wellbeing of customers, communities, employees and the environment ought to be at the forefront of strategy.
Termed ‘purpose-driven banking’, this shift often encompasses ESG-related activities as well as a broader commitment to customer relationships over profits.
Purpose-driven banking has broad support among the industry’s leaders, with 82% of executives agreeing that financial services organisations can pursue profit and a better society at the same time. That sentiment is even more common among C-level executives, with 91% in agreement.
Arguably one of the most interesting results of the survey is the fact that 76% of respondents believe that the banking sector has an obligation to engage with and address societal issues. An even larger portion (81%) said that their bank takes responsibility for the social impacts of its activities.
Interestingly, a clear majority felt that the financial services industry is behind other sectors in terms of progress on ESG commitments. About three-quarters (76%) of C-level respondents said this, compared with 61% of all other executives.
Establishing transparent and measurable ESG goals aligned with corporate strategy is one area where leaders feel behind, with just 38% feeling that their organisation had achieved this. Another important aspect of the purpose-driven mindset is recognising how banks are fundamentally linked to other stakeholders in society. When asked which were the “most important groups for financial services organisations to engage with in order to have the most positive impact”, the technology industry, investors and customers were the top three choices. They were followed by consumers and government or policymakers.
Growing pressure from customers, communities and other external stakeholders are likely to influence the extent to which the banking sector embraces ESG practices, however it’s clear that the banking sector looks set to transform over the next decade. And transform it must.

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