B2B marketplaces are experiencing a radical change, where sectors like retail and e-commerce have marked significant uptake. Evolution of UPI, the introduction of account aggregators, OCEN, and what’s next? Embedded Financing!
Embedded finance is the rapid developmental wave that has gained traction in B2B space. Be it for making transactions, or facilitating lending, banking, and insurance services, companies are no more required to develop a separate Fintech company. Embedded financing eliminates the long-winded processes and allows all businesses to effectively integrate services of payment, transfers, insurance, and credit in an accelerated way.
This emerging trend is favourably paving the way toward becoming a $7trillion market by 2030. When it comes to the B2C sector, embedded finance is no more a bizarre term. They took on the embedded payment options at full tilt to match customers’ demands. Further, the beneficial credit options and the streamlined process has made B2C businesses gain a staggering acceptance across the globe. Such evolving market behaviour has also urged the B2B landscape to offer various real-time, convenient payment options. They are now considering altering their financial system models to improve buyer experiences and making absolute online payment a mere reality.
Pandemic upended the operations of almost every sector and made B2B businesses realize the need for digitization. Pivoting from traditional ways to online means wasn’t so easy for them, however, it does lend considerable benefits.
To remain relevant, more companies are adapting embedded finance and its potential is substantial. Here’s a briefing on how.
Harnessing Growth amid Consistently Evolving B2B Marketplaces
Gone are the days when customers used to prioritize varied payment options over performance. If we consider the present-day scenario, all they seek is a secure, rapid transaction process.
Think of incurring a B2B transaction. It includes a lot many steps such as credit approval, verification, paper invoicing, amount processing, and settlement. In addition, businesses also need to decide on payment terms, options, and more if they are dealing in an online space. Not just this, B2B transactions involve several parties varying from buyers to account payables. This could cost them several bucks and more time if compared to B2C.
Being accustomed to the B2C sector’s use cases, users now expect similar convenience while dealing with B2B platforms. B2B leaders have turned this notion on their heads and decided to offer easy access and a satisfactory user experience. This is where embedded finance heaves into view. By embedding finance options into the process, companies can make the buying experience much better. With frictionless processes and engaging services, it influences customers to hold on to the platforms, which eventually leads to enhanced experience and more revenue. This gives them an added value benefit and highly helps them drive repeat purchases. Businesses that don’t opt to offer these value-added lending services may find it difficult to thrive amid fierce competition.
Moreover, embedded finance effectively transforms the value chain of the business. It eliminates the need for third-party sources or merchant credit and enables them to conduct operations swiftly, and smoothly. With eased operations, the companies can experience a boost in average order value and customer lifetime value.
Jumping on the embedded finance bandwagon, several leading companies have kick-started developing high-end B2B applications. The recent instances of Shopify and Payoneer providing merchants with embedded banking solutions seem to be evidence of its wide acceptance.
If you’re at your wit’s end, there are many Fintech platforms like Pirimid to help you attain a multitude of credit options. Finding the right service provider will help you flourish on the competitive curve perfectly.
Fueling B2B Marketplaces to Ride the Wave of Digitization
Earlier, to offer financial services companies were required to establish a Fintech arm. This involved significant costs, years to build a platform, and extensive efforts to generate profits. Businesses are no longer required to spend huge amounts, time, and efforts in integrating FinTech services by dint of embedded financing. The invoice financing solution helps B2B enterprises to refrain from this hassle, enabling quick supplier and buyer payments.
The prevailing payment term of 30, 60, and 90 days in traditional B2B marketplaces is something buyers still expect today. They are not yet convinced to make instant payments while availing products/services online. On the contrary, suppliers expect to receive payments right away. Operating on digital platforms makes it difficult for B2B companies to meet customers’ and supplier needs all at once. They require immediate payments to maintain the capital flow effectively. Consider companies offering extended credit terms to buyers. All that they will end up with is increased credit risk.
Embedded financing has made it possible to offer buy now pay later services to B2B enterprises. Its key use case invoice financing allows B2B companies to meet these payment expectations. They can build both customers as well as supplier loyalty and mitigate the credit risk seamlessly. They can leverage the benefits of increased cash flow, optimize working capital and equip it further in company operations and growth.
Embedded financing further scales down the transaction funnel. Businesses can easily practice trade and initiate payments without little to no friction added. This ultimately initiates customers/suppliers to raise valuable networks and order volumes, thus boosting revenues and profits. The increasing transactions ensure that the business stays ahead of its counterparts, inviting greater user stickiness and brand loyalty.
Picture this. You’re a B2B service provider who plans to offer a pre-approved finance option to eligible companies through your system software. As a prime benefit, this can attract more customers and help you to stand out from the competitors. Moreover, having online customer trust established at its source, you could expect to generate revenue streams. These options can lend you commissions upon each insurance or loan passed via the platform.
Embedded finance invites opportunities for collaboration, increasing the revenue channels. B2B companies have comprehensive data which can be of essential use to other businesses. Digital platforms have access to huge data and can share these details with the companies they have collaborated with. Particularly for banks and financial institutions, embedded financing can help to identify the borrowing needs of customers, analyze data, build the credit gap and meet industry requirements timely.
The Future Holds Great Potential
So far, sectors like retail and e-commerce, transport and logistics, and travel and entertainment have embedded financial services into their systems to a great extent. Researchers identify its potential in other industries such as healthcare, education, food and beverage, and more.
Have in mind digital payment options getting extended to subscription-based models similar to that in several B2C platforms. It is expected to happen by plugging in embedded financing services and the time is not far off. If the subscription consumption option is implemented rightly, B2B businesses will be able to offer greater flexibility, zero time constraints, and trouble-free accessibility. B2B providers should start looking ahead at offering services/products based on a consumption basis. This pay-as-you-use approach will undeniably do wonders for B2B portals.
The potential of embedded finance is vast. Large-scale networks and immense efforts to lend clients utmost satisfaction are the key factors you should consider to reap its benefits.
If integrated well, embedded finance will provide a slew of efficient financial products and services to clients. It can make these services easily accessible where customers can have the benefits in real-time. The solution suits best for MSMEs as they can benefit from lower costs, higher liquidity, and relevant, reliable networks. Pirimid Fintech has Plug and Play Embedded Financing solutions which helps digital platforms to enable embedded credit options for both buyers and sellers over their platform. Hence, digital platforms can strategically enable embedded financing options with Pirimid’s sophisticated solutions.