In 2025, embedded lending is changing the face of financial services. Lenders in the UK are at a crossroads of technological automation versus risk appetite. The burning question on every lender’s mind: Should we underwrite these embedded loans ourselves, or serve as facilitators who offer infrastructure while offloading risk?

With the surge in Open Banking adoption, real-time risk models are advancing, and platforms now require seamless financing solutions. Lenders must decide how deeply to embed themselves and comprehend the implications while balancing speed, efficiency, risk, regulatory implications and strategic advantages.

The Embedded Credit Explosion

Statistics underscore the rapid shift in lending modalities. Globally, embedded lending is projected to surge from ~US$40 billion in 2024 to nearly US$45 billion by 2034, with a compound annual growth rate (CAGR) of ~9%. In Europe, the embedded-finance channel is poised to account for 20–25% of retail and SME lending revenues by 2030.

Buyer behaviour reinforces this trend: 79% of banks anticipate that banking will be “deeply embedded” in commercial activities, while financing approval rates of 85% or higher have been achieved via embedded point-of-sale (POS) offerings.

Underwriting: Risk, Reward, and Regulatory Bearings

When lenders underwrite embedded credit themselves or directly, they bear the full credit risk but also gain higher margins and better control.

Advanced Underwriting via Open Banking

2025 is the year when real-time affordability has matured. Open Banking-enabled flows now power automated decisioning that considers actual cash flows, income, and outgoings in real-time, which dramatically enhances underwriting precision. For instance, Pulse’s real-time affordability engines use Open Banking feeds to verify income, calculate disposable income, and make sub-minute decisions, lowering default rates and boosting inclusion.

Additionally, embedded platforms gather flow-based and platform-specific data (e.g., ecommerce sales, invoices), enhancing risk modelling with dynamic insights that standard bureau data cannot provide.

Regulatory Intensity and Accountability

However, underwriting means regulatory accountability. FCA mandates around affordability, especially in embedded credit, require auditable, fair, and transparent models. This demands investment in explainable AI, consent-first architectures, ongoing monitoring, and AML/KYC compliance. All of these are increasingly embedded through compliance-as-code APIs.

For lenders who can manage circumventing these hurdles, underwriting embedded credit offers both strategic and financial upside, but only with robust governance.

Facilitating: Building the Bridge, Avoiding the Bridge Loan

Alternatively, some lenders may choose to act as infrastructure enablers, partnering with SaaS companies or fintechs, to offer credit products without taking on credit risk.

Plug-to-Play Embedded Lending

SaaS companies like Pulse offer their Unified Lending Interface (ULI), which allows banks and lenders to integrate into partner platforms with minimal development, automating loan origination, underwriting, and loan servicing for embedded loans. Pulse reduces the loan application time to under 3 minutes, while its underwriting automation solution, Einstein aiDeal, can process thousands of applications simultaneously. It can also make decisions on 95% of deals in under 60 seconds, using customisable criteria. Once funds are disbursed, Pulse’s Loan Management System (LMS) can help track repayments, delays and defaults seamlessly. This enables banks and lenders to massively scale volumes and efficiency with no upfront cost. To learn more about Pulse ULI, contact us today.

Opportunities and Limitations

This facilitator role drives growth, reduces customer acquisition cost, and allows lenders to scale via third-party ecosystems. Lenders must trust external underwriting models while ensuring compliance is upheld. Pulse does offer white labelling for a seamless customer journey, along with an impeccable underwriting solution: Einstein aiDeal, which empowers instant decisions and complete control over criteria, including interest rates. Lenders can adjust these criteria in real-time, creating unparalleled agility and competitive advantage.

Balancing Act: When Underwrite Makes Sense, and When to Step Back

Internal Underwriting 

• Risk Control:  Maintain control through proprietary AI models, taking on full regulatory responsibility.
• Cost Efficiency:  Offers higher margins but requires massive investment in technology and compliance infrastructure.
• Market Reach: Enables direct-to-consumer embedded products that build brand equity.
• Compliance Burden: Carries the full weight of FCA, KYC, and AML obligations and consequences for non-compliance.

Facilitated Underwriting 

• Risk Control Relies on third-party underwriting, resulting in reduced internal control.
• Cost Efficiency: Requires less integration effort and is highly scalable through partnerships.
• Market Reach: Allows quick access to the relevant target audience with reduced CAC.
• Compliance Burden: The regulatory burden is shared, but firms must ensure their partners remain compliant.

If your strategy leans towards direct embedded lending, your firm would need to invest in automated AI underwriting, real-time affordability engines, and compliance tooling to safeguard your portfolio and brand trust. This would require significant resources, cost, skilled personnel and time.

If you prefer facilitation, seek deep yet trust-bound partnerships with SaaS companies like Pulse, characterised by structured, thorough API-first architecture and transparent SLAs, which ensure regulatory alignment while allowing you to scale your lending footprint swiftly. An excellent example is Pulse’s ULI, which offers complete control, flexibility, speed, accuracy, and end-to-end lending solutions designed to transform the entire lending process, from application and underwriting to disbursement and loan servicing.

Regulatory Imperatives and Ethical Considerations

2025 regulatory frameworks (FCA oversight, open banking rules, Data Protection Bill) tighten lending standards. Underwriters must ensure affordability, avoid addictive credit traps, and mitigate bias.

Both underwriting and facilitating models must prioritise:  

• Transparent, provable decision logic (especially in AI systems).
• Audit trails for affordability and consent (Open Banking).
• Risk monitoring (early warning systems, flow-based scoring).
• Data governance ensures user privacy, GDPR compliance, and the ethical use of data.

2025 Snapshot: Real-World UK Alignments  

Let’s draw from examples:

• Pulse: Offers full stack underwriting and loan origination solutions via Pulse ULI and Einstein aiDeal for lenders who want to embed with control and speed. Also offers Pulse LMS for post-disbursement loan servicing.
• Wagestream: Demonstrates the perils of ease-of-access loan products, highlighting the need for responsible underwriting and avoiding over-indebtedness even in employer-driven embedding contexts.

Conclusion: A Tailored Approach for the UK Lender

In 2025, UK lenders face a pivotal juncture: embedded credit is expanding from consumer BNPL to business working capital, and the path they choose will define their agility, profitability, and brand ethos for the years ahead.

• Underwrite internally if you seek full control, enhanced margins, and long-term brand positioning, while being aware of the heavy investment and stringent regulatory obligations, which is indeed a double-edged sword.
• Facilitate lending if you’d prefer to scale rapidly, lean on SaaS companies like Pulse, and focus on efficiency, economies of scale and volumes, with reduced compliance risks.

While embedded credit integrations via reliable companies, such as Pulse, demonstrate undeniable advantages, lenders who are comfortable with absorbing higher risk can consider underwriting internally; however, this approach would curtail their ability to scale in terms of volume and speed.