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What is Lending-as-a-Service (LaaS)? A Complete Guide For Financial Institutions

Lending As A Service

What is Lending-as-a-Service (LaaS)? A Complete Guide For Financial Institutions

Updated: March 7th, 2023

Fintech end-to-end lending platforms are banks’ newest, lowest cost solution to meeting customer demands

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How Financial Institutions Are Providing SMB Customers Term Loans, More Quickly and More Profitably

The banking industry is experiencing a major shift towards digital lending solutions, as small businesses increasingly look for fast and convenient access to funding.

According to a report by Accenture, digital lending is expected to grow to $124 billion by 2025, representing almost 26% of the total global lending market. In order to meet this demand, many banks are considering building or buying their own digital lending platforms.

However, partnering with a lending-as-a-service (LaaS) provider such as Funding Circle can offer a more profitable and efficient solution for banks looking to offer their customers a digital small business lending product experience.

SMBs are unsatisfied with traditional financial institutions and looking elsewhere

  • 89% of SMB surveyed feel underserved by their primary banks and are considering a shift to a more accommodating alternative.
  • 72% of SMB surveyed say banks have ineffective credit and collection practices.
  • 61% of SMB have a relationship with two to five traditional banks, and nearly a quarter said they worked with six to 10 service providers.
  • 64% of SMB surveyed cite lack of automation as technology challenge.

Sources: Capgemini Research Institute for Financial Services. “World Payments Report 2022 Executive survey.” Oct. 2022,

What is Lending-as-a-Service (LaaS)?

Lending-as-a-Service for financial institutions is a platform solution offered by financial technology companies that gives banks, credit unions and CDFIs the ability to provide their customers a fully integrated, digital end-to-end borrowing experience without the significant investment and resources required to build or buy their own platform. By leveraging this technology and expertise, financial institutions can quickly and easily offer financing products to delight their small business customers and earn attractive revenue.

Gone are the days when traditional financial institutions could rely on an analog borrowing experience to meet their customers’ needs.

Our partnership with Funding Circle has accelerated our ability to serve the needs of our small business clients.

– Chris Johnson, Sr VP & President, Pitney Bowes Financial Services


Why Partner with Funding Circle?

Funding Circle’s lending-as-a-service program allows financial institutions to offer their customers a fully-integrated, digital lending experience including credit underwriting, technology, and operations without the cost prohibitive investment and resources required to build or buy their own platform.

It can cost a traditional financial institution tens of millions of dollars and years to build a digital lending platform from scratch.

By leveraging Funding Circle’s technology and expertise, banks can quickly and easily enter the digital lending market and start offering loans to small business owners with minimal upfront costs or investment.

Engaging in Funding Circle’s ‘lending-asa- service’ platform is an important strategy for more effectively and efficiently serving clients within our market segments, thereby increasing our overall impact as a Community Development Financial Institution (CDFI). Through our partnership with Funding Circle, DreamSpring has enhanced our lending capacity and client volume, while providing a quick and seamless loan process for clients. That’s a win-win.

– Francisco Lopez, DreamSpring Chief Operations and Impact Officer

  • End-to-end digital lending platform
  • Attractive Revenue
  • Minimal Upfront Costs of Investment
  • Competitve Market Advantage
  • NPS 77
  • Product Customization

Partnering Comes with Benefits

Partnering with Funding Circle can also be more profitable for banks while also delighting their customers.

LaaS is built on a unique type of business model, a revenue sharing model, meaning that banks can earn a percentage of the revenue generated from loans made through the platform and all net interest margin from loans originated.

This can be more cost-effective than building or buying a platform, and it allows banks to share the risk and reward of lending.

Competitive Advantage

According to World Payments Report, 91% of consumers said that convenience is a key factor in their decision to use a digital lending platform.

LaaS solutions provide a seamless and convenient experience for customers, which can help banks differentiate themselves from competitors who do not offer a digital lending solution that their customers demand.

Additionally, banks see material increases in loan originations, customer retention, revenue and decrease in fixed costs of originating loans digitally.

Sources: Capgemini Research Institute for Financial Services. “World Payments Report 2022 Executive survey.” Oct. 2022,

Customer Satisfaction

Partnering with Funding Circle not only benefits traditional financial institutions, but also small businesses looking for access to funding. Funding Circle’s platform allows small businesses to apply for loans and receive funding quickly and easily, without the time-consuming and complex process of traditional bank lending.

Fast and Convenient Access to Business Financing

  • Apply for a loan online < 6 minutes
  • Decision as quickly as 24 hrs
  • Funding in as few as 48 hrs

This is much faster than the traditional bank lending process, which can take weeks or even months.

According to McKinsey and Company, it takes small businesses an average of 27 days to secure funding from a traditional bank loan. By partnering with Funding Circle, banks can help small business owners access funding much faster, allowing them to take advantage of opportunities and grow their business.

Superior Customer Experience

Funding Circle’s Net Promoter Score is 77 which is considered to be “excellent” and above the industry average. This high NPS score is a testament to Funding Circle’s ability to consistently provide a high level of service and customer satisfaction.

Keep Your Customers & Revenue

Up to $300 million revenue opportunity

Funding Circle’s small business loan customers bank with more than 4,000 banks, credit unions and other financial institutions around the country, ranging from large multinational banks to small, local credit unions. For those institutions, partnering with Funding Circle can mean a big market opportunity to recover up to $300 million in lost revenue.

Through Funding Circle’s lending-as-a-service offering, partner institutions are able to monetize their customer base and keep assets in-house, all at scale, while streamlining and optimizing the experience for those borrowers throughout the loan process.

[Funding Circle] is increasing access to capital at a lower cost for borrowers who are less likely to receive credit from traditional banks… and “predicting future loan performance more accurately than the conventional method to credit scoring, leading to better loan performance.¹

– Philadelphia Federal Reserve & Bank For International Settlements


With an end-to-end lending platform that combines credit and underwriting expertise, operational efficiencies and a user-friendly digital platform that promote higher NPS scores, Funding Circle is an ideal partner to banks looking to start, expand or augment their own small business lending programs.

Credit | Efficient underwriting and credit optimization

  • 10 year credit model performance delivering attractive returns
  • Predicting future loan performance more accurately than conventional credit scoring
  • $4.1 billion originated, 49,000 loans, 40,000 small businesses, 391,000 applications
  • 1.2 billion data points on 20,946,186 businesses

Technology | Digital Loan origination that SMEs love

  • Co-branded or white-labeled digital application accessible via dedicated landing page
  • 6 minute application for borrower to complete
  • 86% completed application rate
  • Optional third party API integrations to seamlessly augment customer data

Operations | Loan Processing, Servicing, Compliance

  • Funding Circle can retain servicing for a low fixed fee
  • Customers have access to online portal for self-servicing
  • Market leader in customer satisfaction (NPS 77)
  • BSA/AML program similar to that of federally regulated financial institutions

Schedule Your Demo

Want to learn more about Funding Circle and Lending-as-a-Service? Schedule a demo with our team.


Affordable business financing. Crazy fast.

Funds delivered in days, not months.

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