Martin McMillan, co-founder of Mobile Finance Collective, shares his insights on an unprecedented new financing mechanism in gaming.
Martin McMillan is the founder of Mobile Finance Collective.A growing trend has emerged in the mobile gaming and application space that could reshape user acquisition (UA) financing and who controls capital flows.
UA has become more scientific again. With improvements in predictive LTV (pLTV) models and deeper insights into user behavior, acquisition has once again become a highly measurable, performance-driven function.
As a result, many film companies can now accurately predict their return on investment and profitability.
This predictability highlights a long-standing inefficiency: equity capital is too rigid and expensive for widespread funding. In recent years, more flexible, non-dilutive financing tools have emerged, from group-based lending models to asset-backed loans based on the residual value of existing user bases.
Most of these innovations come from startups launching alternative lending or venture capital funds that introduce sidecar credit strategies. These groups often bring a more data-driven approach than banks, employing technology-driven underwriting and deploying capital faster. However, they face a common limitation: their business models rely on returns from the capital itself.
Meanwhile, banks continue to offer traditional loans like AR lines—benefiting from structurally lower capital costs achieved through deposits—but often lack the underwriting flexibility or risk appetite needed to participate in the competitive financing required for widespread funding.
However, a new approach is beginning to take shape—led by payment companies near the SaaS and mobile ecosystem. This could have profound implications.
Let’s quickly review how traditional lending institutions operate. Whether it’s a credit fund or alternative lenders raising capital from credit funds, the model is the same: raise capital from limited partners, deploy it into loans, and generate returns through interest margins. The transaction is one-dimensional—they are in the business of returns.
Now consider a SaaS or payment platform with a usage-based revenue model. These businesses do not need to derive value from loan profit margins. Their advantage comes from increased traffic through their core platform. Capital becomes a means to drive customer growth, directly enhancing their revenue, retention, and enterprise valuation.
This shift in incentive mechanisms fundamentally changes the dynamics of lending:
They can offer funding at cost or near cost, not because they lack experience, but because they can win without needing profits.
They win through volume, not margins.
Let’s take a SaaS company serving app developers, whether in payments, attribution, monetization, analytics, or compliance. These platforms typically rely on real-time updated underwriting-grade data: revenue, retention curves, churn risk, and historical spending patterns.
They know their customers’ health better than any external lender.The embedded lending products within these platforms have significant advantages:Intrinsic customer acquisition—no sales action required;The product is already integrated into the user experience.
Superior underwriting data—no need for third-party APIs or diagnostic tools; they already have the full picture.
High trust and adoption—studios already rely on these platforms in their daily lives. Capital products launched in this context have immediate credibility.
White-label flexibility—loan products can be “driven” by third-party capital providers, allowing operational separation while retaining control.
Alignment with SaaS metrics—loans facilitate customer growth and retention, which are directly related to enterprise value. This is a strategic lever, not just a revenue line.
Most importantly, embedded providers can offer cheaper and more flexible capital than external lenders because their profits come from elsewhere.
For private credit funds, this is not a threat but an invitation.
Credit funds can provide capital to platforms that already possess embedded data, distribution, and customer trust, rather than lending directly to game or app studios (where data access is limited and risks are higher).
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Diversification under the hood—SaaS platforms become primary borrowers, spreading capital across hundreds of studios. -
First-loss adjustments—platforms may choose to take subordinate positions or guarantee part of the book value, enhancing risk-adjusted returns. -
Lower acquisition costs—no need to initiate borrowers one by one; the platform handles allocation. -
Superior risk management—underwriting is based on real-time operational metrics rather than static financial or tracking data.