By Arko Chandra Published on : Aug 23, 2022
A radical wave of change is sweeping past B2B marketplaces – embedded finance. For many businesses, embedded finance now is just limited to making online payments using Google Wallet, Apple Pay, or PayPal, or dealing in BNPL (Buy Now Pay Later) options lately. However, the scope and applications of embedded finance are much broader than just moving money.
Embedded finance typically empowers brands to integrate financial services like transactions, credit, and insurance, among others, into their digital experience through APIs.
Why the Need for Embedded Finance?
More than one factor has expedited the need for fast, digital financial transactions:
COVID-19: Almost in the blink of an eye, digital and remote options to keep businesses running became necessary as the COVID-19 pandemic emerged.
The Hunt for Data: Payments are another site for businesses to gather data using which they can improve their products, experience, and marketing techniques, thus escalating transactions, growth, and stickiness.
New-Age Preference: Most of today’s B2B decision-makers are millennials and Gen Z’s who prefer completing transactions online, be it receiving payment or paying an invoice.
The Different Needs of B2B Transactions
An embedded finance transaction serves the unique needs of three parties – suppliers, buyers, and the platforms themselves. For instance, large buyers are used to BNPL options where they buy on net terms to maintain their cash flow.
As for suppliers, they need to sell now and collect now. Paying them as soon as possible is a powerful driver to keep them coming back to the platform. Suppliers also need to sustain their cash flow, which can be enhanced with fast or instant payment options.
Lastly, platforms look out for more cash and fewer risks. However, to meet the needs of suppliers and buyers and increase transactions, platforms often extend credit to buyers and pay suppliers quickly. This results in increased risks due to credit extension, more expenditure on administrative resources for their own underwriting, and cash shortage to reinvest in the business.
The Solution: Quick Invoice Payments
Embedded finance services like AI-enabled invoice factoring pays invoices within days after a transaction rather than months. This fulfills all the needs in a B2B transaction – buyers get to maintain their net terms, suppliers have their cash flow, and platforms don’t need to extend credit to buyers, thus reducing risk.
Embedded Lending: The Noteworthy Embedded Finance Service
Embedded lending amounts to a significant slice of embedded finance. Already several lending-as-a-service infrastructure providers are popping up who are enabling businesses to offer credit lines to their customers. These new lending solutions are sure to attract businesses who struggle to access more conventional options or just want a smoother, more customizable experience.
As revenue-based repayments and other advanced lending options become easily and widely available under embedded finance experience, they will go on to become the benchmark. Consequently, more companies will flock to offer as well as receive these services.
With the discovery of the vast potential and varied benefits of embedded finance, more B2B businesses are carrying on pivotal shifts in their processes to be head and shoulders above their competitors. And this practice will continue until embedded finance becomes the new normal in the B2B territory.
A radical wave of change is sweeping past B2B marketplaces – embedded finance. For many businesses, embedded finance now is just limited to making online payments using Google Wallet, Apple Pay, or PayPal, or dealing in BNPL (Buy Now Pay Later) options lately. However, the scope and applications of embedded finance are much broader than just moving money.
Embedded finance typically empowers brands to integrate financial services like transactions, credit, and insurance, among others, into their digital experience through APIs.
Why the Need for Embedded Finance?
More than one factor has expedited the need for fast, digital financial transactions:
COVID-19: Almost in the blink of an eye, digital and remote options to keep businesses running became necessary as the COVID-19 pandemic emerged.
The Hunt for Data: Payments are another site for businesses to gather data using which they can improve their products, experience, and marketing techniques, thus escalating transactions, growth, and stickiness.
New-Age Preference: Most of today’s B2B decision-makers are millennials and Gen Z’s who prefer completing transactions online, be it receiving payment or paying an invoice.
The Different Needs of B2B Transactions
An embedded finance transaction serves the unique needs of three parties – suppliers, buyers, and the platforms themselves. For instance, large buyers are used to BNPL options where they buy on net terms to maintain their cash flow.
As for suppliers, they need to sell now and collect now. Paying them as soon as possible is a powerful driver to keep them coming back to the platform. Suppliers also need to sustain their cash flow, which can be enhanced with fast or instant payment options.
Lastly, platforms look out for more cash and fewer risks. However, to meet the needs of suppliers and buyers and increase transactions, platforms often extend credit to buyers and pay suppliers quickly. This results in increased risks due to credit extension, more expenditure on administrative resources for their own underwriting, and cash shortage to reinvest in the business.
The Solution: Quick Invoice Payments
Embedded finance services like AI-enabled invoice factoring pays invoices within days after a transaction rather than months. This fulfills all the needs in a B2B transaction – buyers get to maintain their net terms, suppliers have their cash flow, and platforms don’t need to extend credit to buyers, thus reducing risk.
Embedded Lending: The Noteworthy Embedded Finance Service
Embedded lending amounts to a significant slice of embedded finance. Already several lending-as-a-service infrastructure providers are popping up who are enabling businesses to offer credit lines to their customers. These new lending solutions are sure to attract businesses who struggle to access more conventional options or just want a smoother, more customizable experience.
As revenue-based repayments and other advanced lending options become easily and widely available under embedded finance experience, they will go on to become the benchmark. Consequently, more companies will flock to offer as well as receive these services.
With the discovery of the vast potential and varied benefits of embedded finance, more B2B businesses are carrying on pivotal shifts in their processes to be head and shoulders above their competitors. And this practice will continue until embedded finance becomes the new normal in the B2B territory.
