As business becomes more digitalized and business’ needs become more complex, embedded financing solutions are becoming increasingly important to the B2B finance ecosystem.
Business-to-business (B2B) markets are seeing increased demand for embedded finance. They are changing how B2B firms buy and sell. At the same time, they are opening up new business opportunities for fintech brands and financial and non-financial institutions.
Any company with a sizable user base must offer financial services to complement its existing products or risk falling behind.
Many B2B businesses are unsure how to successfully implement this new B2B finance model into their payment infrastructure.
Let’s examine embedded finance in more detail and some trends that experts in the field are observing.
What is embedded finance?
As defined by Ernst and Young,
‘Embedded finance is the integration of financial services or products, such as payments, within a non-financial services company’s customer value chain and offers brands the ability to shape a seamless customer experience.’
In embedded finance, financial services incorporate non-financial experiences, platforms, or customer journeys. This can include accepting payments and offering financing options such as buy now, pay later.
B2B financing is crucial to business-to-business transactions. Buyers rely on credit lines to handle the large average orders typical in B2B transactions.
Today, business trade is becoming more digitalized, and business needs are becoming more complex. Embedded financing solutions are becoming increasingly important to the B2B finance ecosystem. Embedded finance has advantages that go beyond business-to-consumer transactions.
Through the provision of B2B embedded finance products like buy now, pay later (BNPL) and trade credit insurance. These are more accessible, affordable, and efficient than legacy solutions.
Trends in Embedded Finance
Let’s look at the main trends and factors propelling the growth of B2B embedded finance.
(BNPL) Buy now, pay later
Customers can frequently select a financial product as a payment plan when buying a consumer product online. They could make weekly or monthly installment payments directly from the bank account.
These point-of-sale loans are hugely popular and important for improving user experience and fostering repeat customer business.
Growth of APIs
The increase in application programming interfaces, or APIs, is another emerging trend in embedded finance. By creating these plug-and-play solutions, fintechs make it simple for any company to accept and process payments.
Adding more services to your offering imparts a competitive edge in a highly competitive market. Additionally, the increased use of APIs will allow more companies to choose which services they want.
Increase in B2B solutions
For traditional offline B2B transactions, embedded finance options are becoming the norm. This includes several payment trends in embedded finance, such as:
- The rise in millennial decision-makers
- COVID-19 pandemic-related increase in demand
- Previously mentioned improvements to UX and usability.
Although the consumer market dominated embedded finance for a long time, B2B applications are undeniably helping businesses. As a result, more vendors will offer embedded finance solutions, increasing market competition.
Embedded instant payments are a new and exciting development in embedded finance. Real-time payments guarantee that buyers and sellers get paid on their preferred terms. However, they also help platforms stand out and keep customers interested.
Additionally, it aids companies in managing risks and liquidity better. In the coming years, there will be an increase in the number of real-time payment options and services.
Another trend in embedded finance is the rise of embedded fintech. This refers to the incorporation of fintech options into products and customer channels by finance companies.
Both diverge from the BNPL trend in the finance industry. Embedded finance, unlike BNPL, involves integrated payment solutions with the platform. This helps to address issues on all sides of the buying equation.
This includes issues faced by buyers, suppliers, and platforms.
Embedded finance naturally offers many opportunities for cooperation. Businesses in health, education, real estate, and employment have all successfully integrated financial services in recent years. This trend will only continue as these industries become more digitally oriented.
This gives businesses and tech companies plenty of room to collaborate with smart B2B marketplaces, apps, and ecosystems.
Unlimited growth potential
Industries such as transportation and logistics have implemented embedded finance solutions for some time. Others, like health care, automotive, energy, and utilities, are just beginning to adopt embedded finance. This offers a fascinating opportunity for growth, not to mention limitless potential.
B2B customers continue to demand and push for a more digital-first customer experience today. This creates many opportunities for buyers, suppliers, platforms, and fintech companies.
In conclusion, the disruptive force of embedded finance is reshaping the future of banking. Embedded lending is shattering barriers and democratizing access to credit. Fintechs are leading the charge with innovative offerings.
Embedded finance isn’t just the future; it’s already here. It’s completely changing how users manage their money and bringing about a better financial future for all.