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

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

Updated: August 31st, 2023

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The Rise of Digital Lending

Convenience, speed, and cost savings are just a few of the reasons why people love digital banking, and digital lending is no different.

According to a data 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 a competitive edge to their customers.

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

Lending as a service (LaaS) is a relatively new concept in the world of finance and technology, providing innovative resources and solutions for both lenders and borrowers. For financial institutions, LaaS is a platform solution that gives banks, credit unions, and CDFIs the ability to offer customers a fully integrated, digital end-to-end borrowing experience without the significant investment and resources required to build or buy their own platform.

Gone are the days when traditional financial institutions could rely on an analog borrowing experience to meet their customers’ needs. By leveraging this platform as a service, financial institutions can quickly and easily offer digital services to delight customers and earn more revenue.

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


LaaS and Small Businesses Lending

SMBs are unsatisfied with traditional financial service providers.

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

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

Small businesses need a reliable way to get quick access to much-needed capital, and traditional bank loans often fall short of their needs and timeline. As businesses increasingly turn to LaaS for quick loans, financial institutions must pivot to meet the needs of today’s customers.

Why choose Funding Circle for your LaaS solution?

Our NPS score of 77, classified as excellent and well above the industry average, is a testament to Funding Circle’s capacity to provide consistently-high levels of service and customer satisfaction, and the same can be said for our LaAS!

Our LaaS allows financial institutions to offer their customers a fully-integrated, digital 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. With Funding Circle’s LaaS, banks can quickly and easily enter the digital lending market and start offering business loans with minimal upfront costs or investment.

Engaging in Funding Circle’s LaaS 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

Our Revenue Sharing Model

Our LaaS platform 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 rewards of lending.

Get a Competitive Advantage in the Lending Sector

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

By implementing LaaS banks can differentiate themselves from competitors in the financial services sector who do not offer the LaaS option that so many customers now demand.

Additionally, banks see material increases in loan originations, customer engagement, and 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,

Improve Insights into Customers

LaaS improves customer insights by enabling lenders to access a wider range of data collected from consumers, which can be used to create more accurate credit profiles. This additional data helps lenders gain greater insight into consumer credit risk, so they can more accurately assess creditworthiness and make quicker decisions about loan offers.

Additionally, LaaS allows lenders to access credit scoring models that take into account non-traditional financial information such as rent payments, utility bills, and living expenses, thus offering an alternative view of the customers’ financial health. As a result, LaaS helps lenders better understand their customers’ behavior and make smarter decisions based on the latest market trends and consumer needs.

Speed Up the Approval Process

According to McKinsey and Company, it takes small businesses an average of 27 days to secure funding from a traditional bank loan. Today, LaaS technology is transforming the way businesses obtain funds, with lenders able to provide loans within days instead of weeks.

By utilizing Funding Service’s LaaS, banks can help small business owners access the funding they need fast. 

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

Keep Your Customers & Revenue

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 LaaS platform, 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 business loans process.

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

[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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