When it comes to fraud, modern lenders are having a hard time. According to recent research from LexisNexis Risk Solutions, small and midsize (SMB) lending fraud rose by nearly 14% year over year in 2024. Also, more than 80% of lenders surveyed reported an increase. Unsurprisingly – and this remains the biggest problem – fraud is usually detected only after the money has already been disbursed.
In other words, the traditional method of disbursing funds is now a risk vector in itself.
Bank transfers – and in some cases, still, checks – might be straightforward and familiar. But they offer poor visibility, limited control, and little recourse if something goes wrong. It’s simple: once the money leaves your account, you’re out of the loop as well.
So more lenders are looking at embedded cards. And this is happening not because they’re a novelty, but because they offer something the traditional methods don’t: a necessary layer of real-time control.
The Weak Link: Fund Disbursement
Lenders have been investing steadily in onboarding, credit scoring, and digitalisation, but the back end of the lending process, the actual disbursement of funds, hasn’t really changed that much.
True, the process is straightforward: approve the borrower, send the money, and log the transfer. Simplicity, however, comes at a cost. First of all, you can’t see where the funds are going. You also can’t stop inappropriate use. And you can’t really trace misuse until it shows up in your loss reports, that is when borrowers default and repayment patterns break down. By then, the fraud is already buried in your books like any other bad debt.
What’s worse, fraudsters don’t waste any time. The first 30 days of a loan are particularly risky. Digital onboarding is now the primary entry point for fraud, and once the funds land in a regular bank account, they’re gone. And this is exactly where embedded cards start to make practical sense.
How Does It Work
Instead of pushing money out of your system, you move it onto a card. That card – virtual or physical – is tied to your programme, your product, and your rules.
For instance, if a lender approves a €50,000 working capital loan for construction materials but disburses cash via traditional bank transfer, there’s really no technical barrier preventing the borrower from using it to pay off unrelated debts or cover personal expenses. This kind of misuse, often called first-party fraud, is hard to detect until repayment fails.
It’s easy, then, to see how embedded cards can prevent this. It’s also easy to see why risk should be viewed more broadly than just getting creditworthiness right – being able to control the payment method is the second part of that same equation.
What Embedded Cards Change for Lenders
When funds are disbursed using an embedded card instead of a traditional bank transfer, the lender stays in control.
In short, you can define how the money is used and not just how much. By embedding financial features and cards directly into their products, lenders can restrict spending to approved merchant categories, block cash withdrawals, and set hard expiry dates. If something looks off, cards can simply be frozen in seconds.
What makes all the difference is that the entire flow happens inside your own product. There’s no need to chase external banks or wait for third parties to take action. In fact, even the chasing becomes rare, because instead of detecting misuse after the fact, you prevent it by design. Put differently, controls aren’t suggested – they’re enforced.
For lenders, this shift from post-hoc oversight to real-time enforcement means fewer losses, less admin work, and better alignment with risk and compliance teams.
A Scalable and Secure Model for Modern Lending
Whether you’re a niche SME lender or a large financial institution, the shift to embedded cards is quickly becoming a competitive necessity. It allows lenders to say yes to more borrowers by reducing the risk of how funds are used after approval.
Solutions like Wallester White-Label provide the infrastructure to make this transition fast and seamless.
Here’s what you get:
- Branded Visa cards (virtual and physical)
- Full control over limits, categories, and expiry
- Real-time transaction visibility and fraud detection
- Mobile wallet support (Apple Pay, Google Pay, Garmin Pay)
- Full compliance: PCI-DSS, PSD2, GDPR
- Launch timelines as short as 8–12 weeks
Lending has moved beyond just assessing creditworthiness. What’s happening now is a rethink of the rails money moves on. And embedded cards give lenders something bank transfers never will: the ability to decide how funds are used – not just when they’re sent.
Ready to modernise your disbursement flow?
Reach out to sales@wallester.com to see how embedded cards can reduce your risk profile.
