How Embracing Embedded Finance Helps Streamline B2B Transactions


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Embedded finance benefits extensive networks and tremendous efforts to lend clients maximum satisfaction. If properly integrated, it offers a wide range of effective financial products and services.

As new business models emerge, the measurability of digital transformation becomes critical. Its quantifiable opportunity needs to make business sense.

It is particularly true now that B2B payments, in particular, are finally and fully digital.

Embedded finance is the seamless integration of a financial product into a non-financial environment. It has been causing a stir on B2B trade platforms and marketplaces.

It helps to weave financial services into the fabric of consumer- and enterprise-facing offerings across various verticals.

Banking transactions are integrated into software, eCommerce, and all other platforms. Hence, financial institutions should be the first to embrace those technological shifts.

Along the way, there is a chance that various businesses will offer eWallets, buy now, pay later, and other lending options to customers right at the point of sale.

There is a sizable market opportunity for businesses that can embed financial products that address the pain points of particular users. In the US alone, the embedded payments, lending, banking, and cards market was already generating $22 billion in revenue by 2021.

By 2026, when US financial transactions will surpass $7 trillion, this is anticipated to reach $51 billion. It is simple to understand why. Integrating financial services into end-user journeys creates a smoother experience.

End users can access credit, payments, or investments without leaving the system they use to carry out their daily operations. That boosts customer loyalty and increases the share of wallets for financial service providers.

Embedded Finance Can Improve B2B

FIs aim to modernize everything from payment processing to providing loans and services related to cash flow and accounting. These last few metrics highlight the pain points in business transactions, making them particularly relevant to changing B2B payments.

The benefits of embedded finance will expand the boundaries of B2B transactions far beyond the limitations of paper cheques and invoices. According to PYMNTS, more than 80% of banks currently offer or intend to provide the option for customers to access accounts. Users can pay suppliers and vendors using their enterprise resource planning (ERP) systems.

This streamlines interactions up and down supply chains, where checks still make up more than 50% of B2B payments. Most embedded finance innovations occur in the business-to-consumer (B2C) market, largely untouched in the business-to-business (B2B) sector.

Financial Services Institutions (FSIs) that take the initiative have a significant opportunity. They can provide a fertile environment for B2B embedded finance innovation. Here are five trends driving the growth of B2B embedded finance:

 Development of B2B ecosystems and platforms

Global trade and B2B commerce are becoming increasingly digitalized due to the pandemic-induced tech boom and the rising number of tech-first, millennial decision-makers. Companies today use various interconnected tools evolving into digital ecosystems to conduct business. The ecosystem should include banking services as a fundamental component.

 The growth of open banking

open banking

Open banking and finance have become more popular due to regulatory forces like PSD2. FSIs can use these capabilities to scale the embedded finance reach to many businesses. This makes it possible to bundle traditional banking services with value-adding non-banking offerings.

The process allows FSIs to enter new markets and cater to new clientele. FinTech can then develop new revenue streams in the face of anticipated banking revenue and profitability declines.

Decreased confidence in financial services

FinTech and big tech companies had a significant trust advantage over FSIs and banks until recently. While that advantage still exists, it is eroding and no longer serves as a significant competitive advantage.

Existing FSIs need not suffer as a result of this. Traditional banks, FinTech, and Bigtechs can convert these new rivals into BaaS (Banking as a Service) customers with the appropriate collaboration model.

API growth

API growth

Recent advances in digitization have increased usage and made embedded finance accessible to virtually all digital businesses. With the introduction of open banking initiatives, APIs have become a business driver.

An updated embedded finance system

For all FSIs, first-generation embedded finance was a replicable model with no means of differentiation. FSIs can differentiate themselves in the coming generation through tailored propositions and the capacity to improve offerings with their IP.

Unlimited Possibilities

Embedded finance has a virtually limitless number of applications. There is a huge opportunity for FSIs to save their corporate clients money and time. They can utilize the faster payment infrastructure that permits the payer to make a payment.

Currently, many manual steps are involved in purchase order finance (PO finance). This is the cash advance that businesses may be eligible for after concluding a deal with their typically larger buyers. With embedded finance, it is possible to:

  • Extract purchase orders directly from the buyer’s ERP system
  • Have them pre-qualified by FSI for financing
  • Make it easier for the seller to access the platform they use to conduct B2B trade with their buyers
  • Automate many of the laborious manual steps

Embedded finance adoption

Businesses need to realize the full potential of embedded finance. B2B firms must use a clear strategy and comprehensive approach. For their ERP customers, this entails utilizing data-driven insights and putting into place frictionless business processes.

This process gives them the tools to successfully negotiate the digital trade landscape and reap the rewards of embedded finance in the digital ecosystem.

Now, industries like retail and e-commerce, logistics, and travel have greatly ingrained financial services into their systems. Researchers note its potential in various sectors, including healthcare, education, and the food and beverage industry.

Like those on many B2C platforms, subscription-based models add to the range of digital payment options. It should happen by incorporating embedded financing services, and the time is close.

Also Read: IoT in Finance

B2B companies can provide greater flexibility by implementing subscription consumption options correctly. It also helps with no time constraints and trouble-free accessibility.

B2B providers must plan to offer services and products based on consumption.B2B portals will benefit greatly from this pay-as-you-use strategy.

It can make these services widely available so users can instantly benefit. MSMEs can benefit most from the solution’s lower costs, higher liquidity, and relevant, trustworthy networks.

Now is the best time for businesses to take advantage of the opportunity provided by B2B embedded finance. Especially given the pressure they are currently facing to accomplish more with fewer resources.

Swapnil Mishra
Swapnil Mishra
Swapnil Mishra is a global news correspondent at TalkCMO, with over six years of experience in the field. Specializing in marketing technologies, Swapnil has established herself as a trusted voice in the industry. Having collaborated with various media outlets, she has honed her skills in content strategy, executive leadership, business strategy, industry insights, best practices, and thought leadership. As a journalism graduate, Swapnil possesses a keen eye for editorial detail and a mastery of language, enabling her to deliver compelling and informative news stories. She has a keen eye for detail and a knack for breaking down complex technical concepts into easy-to-understand language.


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