How Car Dealerships can use Embedded Financing to win the race for customers

Challenges for Local Car Dealerships in the Current Retail Environment

Local car dealerships are facing significant challenges in the current retail environment, affecting their bottom lines. The pressure on local car dealerships has intensified in recent years due to changing consumer behavior and an increasingly competitive landscape. With the rise of online research and purchasing channels, traditional brick-and-mortar dealerships are struggling to capture the attention of modern consumers who are more likely to conduct research online and make purchasing decisions based on price and convenience.

In addition to the rise of third-party digital channels (such as Autotrader, CarGurus,, and TrueCar), local dealerships are also facing pressure from manufacturers who are increasingly demanding more from their dealer networks with the rise of Carvana, Shift, and Vroom and others. These channels are increasing vehicle pricing transparency and enabling consumers to make product comparisons more easily.

Despite these challenges, some local dealerships are finding ways to adapt and thrive in the changing retail environment. For example, some dealerships are investing in online marketing and e-commerce platforms to better reach and engage with customers. Others are focusing on building strong relationships with their customers and offering personalized service to differentiate themselves from competitors.

Ultimately, the future of local car dealerships will depend on their ability to adapt to the changing needs and preferences of consumers. By embracing new technologies and finding innovative ways to connect with customers, local dealerships can continue to compete and succeed in the dynamic and evolving automotive market.

The Need for Frictionless Financial Services in the Dealership Sector

In addition to the challenges of increasing competition and pressure from manufacturers, local dealerships are also facing rising customer expectations when it comes to the purchasing process. With the growth of online and mobile banking, consumers have become accustomed to fast and convenient financial transactions, and they expect the same level of efficiency when buying a car. The customers no longer tolerate traditional financial processing methods that used to take 4-5 business days.

To meet these expectations, dealerships are investing in new technologies and processes to streamline the purchasing and financing process. By offering a fast and hassle-free experience, dealerships can improve customer satisfaction and loyalty, while also differentiating themselves from competitors, especially in today’s economic climate where inflation is high and consumers are feeling financially squeezed.

The Rise of Embedded Finance in the Dealership Sector

Embedded finance has revolutionized the financial industry by allowing businesses to provide financial services to their customers without the need for them to leave the platform. It is a new trend that has been gaining momentum in recent years, and it is set to transform the way businesses operate across all industries. By integrating financial services into non-financial platforms, businesses can offer their customers a more seamless experience and increase their revenue streams.

The concept of embedded finance is simple — it is the integration of financial services into non-financial platforms. This means that businesses can offer financial products such as loans, insurance, and payments within their own platforms. This integration allows customers to access financial services in a more convenient and seamless manner, without having to switch between different platforms. This not only saves time but also makes it easier for customers to manage their finances.

Embedded finance solutions are particularly powerful because they can be integrated into the digital interfaces that users interact with on a daily basis. For example, a retail store can offer financing options to customers at the point of sale, while a food delivery service can allow customers to pay for their orders through their mobile app. This level of integration allows businesses to offer a more personalized and convenient experience to their customers, which can lead to increased customer loyalty and higher sales.

One of the most significant benefits of embedded finance is that it allows businesses to increase their revenue streams. By offering financial services, businesses can generate additional revenue streams through interest charges, fees, and commissions. This can help businesses diversify their revenue streams and reduce their reliance on traditional sources of income. In addition, by offering financial products within their platforms, businesses can create new revenue opportunities that they may not have had access to before.

Another advantage of embedded finance is that it can help businesses build stronger relationships with their customers. By offering financial products within their platforms, businesses can gain a deeper understanding of their customers’ financial needs and behavior. This data can then be used to create more personalized and targeted marketing campaigns, which can lead to higher conversion rates and increased customer loyalty.

Embedded finance is an innovative concept that has the potential to transform the way businesses operate across all industries and the possibilities are diverse, ranging from customer loyalty apps, digital wallets, and accounting software to shopping cart platforms and more.

As stated in the report released by McKinsey & Company, recent projections predict that embedded finance will generate over $230 billion in income by 2025, up from $22.5 billion in 2020, across a variety of businesses. In 2025, embedded finance will generate more than $1 trillion in value at a five-times revenue multiple.

In the US, about half of non-financial businesses have already invested in or plan to use embedded finance. Also, 85% of those who have already integrated embedded finance into their business feel it has helped them increase their customer base, and 88% are happy with the integration overall.

Embedded finance solutions can also help dealerships improve customer loyalty and retention. By offering a more seamless and personalized purchasing experience, dealerships can build stronger relationships with their customers and increase the likelihood of repeat business.

Overall, the rise of embedded finance in the dealership sector is a promising trend that could transform the way car-buying is done in the future. By embracing new technologies and innovative solutions, dealerships can stay ahead of the curve and continue to provide value to their customers.

Examples of Embedded Finance in the Dealership Sector

Embedded finance can be used by car dealerships, in particular, to boost sales and income. Let’s illustrate the concept of embedded finance with an example. Imagine a customer walks into a car dealership to buy a new or used car, and the sales representative offers him financing options right there in the showroom. The customer can apply for a car loan, get instant approval, and drive away in his dream car, all within the same day. 

This is the power of embedded finance, which eliminates the need for customers to go through the hassle of finding a lender, getting approved, and then buying a car. By providing an end-to-end financial solution, embedded finance streamlines the process and enables car dealerships to offer payouts on the same day, making the transaction not only more convenient but also more efficient.

The traditional financing system can be connected to car dealerships through embedded finance, but in a way that is absolutely smooth for the customer. A dealership that offers embedded financial options can make another sale before the new owner even picks up their new automobile. At the time of sale, custom insurance options can be added to the deal. This gives the buyer insurance before they even leave the store and gives the seller a much wider range of products to sell. The consumer might pay their deposit with a few clicks and an account-to-account transfer using open banking technologies without entering their bank account or reference details. In addition, the vehicle dealership might decrease their exposure to credit by collecting monthly payments through direct debits, collecting payments through open banking, and doing much more.

Another example: The market for used cars, which has been growing a lot lately, has a lot of room for embedded finance. Previously, after selling an automobile, sellers had to wait up to 4-5 days to get paid. When embedded financing is used in the selling process, both buyers and sellers get something out of it. Car dealers who use quick payment platforms lower their risk of losing consumers and can ensure secure transactions, protecting both themselves and their customers from fraud and security threats. Buyers benefit from hassle-free instant payment processing. Sales are boosted by this competitive advantage by giving clients more convenience.

Benefits of Embedded Finance in the Dealership Sector

Embedded finance solutions offer significant benefits to car dealers, as they provide a range of features and capabilities that go beyond simple payment processing. For instance, the Whillet solution provides personal accounts that enable dealers to track and analyze payments over any period, add business locations, assign employees to specific transactions, and create a database of customers. In addition, it offers an overall sales statistics function that allows dealers to engage with trends across all dealers in a particular area, enabling them to analyze which cars and regions are popular at any given moment.

In order to provide pass-through services, the company partners with digital platforms (such as auto and equipment manufacturers). This is one method the business can use to take advantage of integrated specialty finance prospects. This arrangement has the advantage of allowing the lending company to maintain its brand recognition. A somewhat minor expenditure is also needed to use the platform.

Given the cost and how quickly this industry is developing, a second approach is to employ a banking-as-service-licensing partner’s and experience to roll out their offering rather than developing technology in-house. Offering financial goods unavoidably—and correctly—entails an additional degree of regulatory scrutiny, which embedded finance companies take over. Yet with greater power comes greater accountability. Embedded finance solutions offer a range of benefits to car dealerships, from increasing sales and revenue to providing a more personalized and convenient customer experience. As the industry continues to develop, it is likely that more dealerships will adopt embedded finance as a key part of their business strategy.

The Future of Local Car Dealerships

The future of traditional offline local auto dealerships has been a topic of much discussion in recent years, with many predicting their decline in the face of competition from online firms. However, this prediction is proving to be premature, and there is still a strong need for these dealerships in various markets across the US and beyond. The key to their success lies in their ability to adapt to the changing competition landscape and offer new and innovative services to their customers.

Recently, two major UK used car dealerships, Motorpoint and Big Motoring World, announced the launch of new branches, suggesting that traditional dealerships are not only surviving but thriving in today’s market. One way that local car dealerships are staying competitive is through the adoption of embedded finance solutions. These solutions provide a range of features and capabilities that go beyond simple payment processing, enabling dealerships to offer a more streamlined and efficient service to their customers.

In addition to embedded finance solutions, local car dealerships are also embracing digital technologies and online sales channels to compete with online firms that sell directly to customers. This includes offering online inventory searches, virtual vehicle tours, and even online financing applications. By doing so, dealerships can reach a wider audience and attract new customers.

As the monopoly that offline local dealerships had over customers in their own geographic area may no longer exist, dealerships will need to find new ways to attract and retain customers. While challenges lie ahead, local dealerships have shown themselves to be adaptable and innovative in the face of changing competition. By continuing to embrace new technologies and offering new and innovative services to their customers, they will continue to be in demand, and their evolution is key to their ongoing success.

Other articles
Signicat: Organisations Are Still Unprepared to Fight AI-Driven Fraud
Bowhead Specialty and Kalepa Improve AI-Driven Underwriting
Retail: Adopting POS Systems, Digital Wallets, BNPL
Swift Is Testing AI to Fight Fraud
How Should Financial Institutions Transform Their Operations Using Gen AI
Business-to-Business Innovation: Leverage, Artificial Intelligence, and Embedded Experiences
Emerging Trends in Insurance and Financial Technology
Simplifying Cross-Border Payments: Fuse Technology’s Impact in the GCC
Thredd’s CEO Jim McCarthy on the Future of FinTech
Revolut Expands Mobile Wallet Partnerships in Africa for Faster International Transfers
Alibaba Cloud Expands Global Footprint and AI Talent Development Initiatives
BBVA Improves Productivity via Strategic Open AI Cooperation
New Era of Payments: Pay-by-Bank Solutions
Banks Must Adapt to an Evolving Open Banking Landscape
Fintech Innovation Needs to be «Mass Produced»