TapWater Turns on Lending Faucet for SaaS Platforms

Embedded lending startup TapWater is now available in beta and has a waitlist in progress for Software-as-a-Service (SaaS) companies and other B2B firms looking to integrate credit solutions directly into their platforms, the FinTech Brain Food newsletter reported.

Headquartered in San Francisco, California, TapWater specializes in helping B2B companies offer tailored, data-driven lending products for their customers, a move that can help boost user retention while also bringing in a percentage earned on the volume originated, according to its website.

See also: Embedded Finance: What’s Old is New Again

“Much like how embedded payments have grown vertical SaaS revenues, embedded lending is a coming trend…,” Simon Taylor, Co-Founder of 11:FS, said in newsletter.

With TapWater, SaaS companies earn a share of revenues while the platform handles the risk, compliance and capital sourcing. TapWater aims to remove the inconveniences and hassles often associated with embedded lending without being a balance sheet lender itself. Instead, it’s building a marketplace that serves the space between banks and SaaS platforms, the newsletter stated.

“In theory, TapWater has done what a SaaS business would do if they were to build their own lending engine,” Taylor said in the newsletter.

Read also: ‘Transaction Mapping’ Speeds Lending Decisions

TapWater takes care of sourcing capital from investors and originating the loans. It also handles overhead associated with those tasks like know your customer (KYC) and underwriting. And the startup finds backers to fund the loans, according to the newsletter.

Embedded lending has the potential to create $2 trillion of market cap in the next 10 years, Taylor said in the newsletter, and it’s just getting out of the gate.

“If I were a bank, I’d look to acquire something like this ASAP,” he said in the newsletter. “SaaS is hot, SMB is hot, embedded finance is hot. What’s not to like?”

See also: The SMB Relationship Through Embedded Finance

Founded by Cosmin Lehene in 2018, TapWater is working on new autonomous business models that facilitate compatible financial relations at “key decision moments in the customer’s journey,” per the company’s website.