Embedded Finance Hits With Credit-Shy Japanese Consumers

Embedded lending is growing in popularity around the globe. It offers users convenient, streamlined access to financing without having to leave the platforms of merchants, businesses and other entities. This type of modern lending could be especially useful to microbusinesses and small businesses (MSBs) wanting to align their cash flow and expenses.

In Japan, however, consumers and MSBs tend to be cautious about and even adverse to using credit compared to other markets. This extends to embedded lending. Just 8.1% of the country’s consumers have used it in the last three months. MSBs were even more conservative, with just 5.3% having used it in the last year.

Considering the low credit use rates in Japan, these seemingly small shares of embedded lending adoption actually reflect significant momentum for these solutions. Yet, to drive further adoption, lenders will need to overcome some key frictions.

““The Embedded Lending Opportunity: Japan Edition,” a PYMNTS Intelligence report commissioned by Visa, explores the state of play for embedded lending in Japan for the consumer and MSB market segments. The report draws on a 360-degree study of lenders and end users, conducted between Jan. 13 and March 15.

Inside “The Embedded Lending Opportunity: Japan Edition”:

• What embedded lending is and how it differs from embedded finance
• How the market in Japan compares to other major world economies
• Which consumers and businesses in Japan are more likely to use it
• The role of cash flow stability in predicting whether a consumer or MSB will use it
• The frictions and pain points consumers and MSBs experience when using it
• The factors that predict how likely a consumer or MSB is to switch to a provider that offers these solutions
• The factors that lenders in Japan consider impediments to offering it

Embedded lending offers consumers and MSBs a highly convenient way to finance purchases without dealing with separate credit applications. Despite Japan’s historical hesitance around using credit, this type of lending has clear growth potential in the country.

This report includes crucial information for lenders looking to become market leaders in embedded lending. Lenders that can address pain points stand to profit. Download the report to learn more about what’s next for this type of lending in the Japanese market.