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EMBEDDED FINANCE OFFERINGS BECOMING A MUST FOR B2B PROVIDERS, STUDY SHOWS

Embedded Finance Offerings Becoming a Must for B2B Providers, Study Shows

Recap

October 13, 2022

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Amid the rise of digital service channels within the B2B sector, businesses increasingly are demanding access to financial capabilities–such as payments, credit and insurance–that are embedded within the context of the non-financial digital tools they use to manage day-to-day business operations. Faced with that demand, such embedded finance solutions are quickly becoming a must-have offering for providers serving the B2B market–and those who can effectively solve their business clients’ pain points with robust embedded finance offerings stand to reap significant benefits in the form of increased customer satisfaction and new, highly sustainable revenue streams.

New research from Galileo Financial Technologies and Juniper Research offers key insights on what’s driving the rise of embedded finance in the B2B sector, details leading use-cases and highlights potential pitfalls providers must avoid in order to realize the full benefits of embedded finance–for their client companies, and their own business.

Based on a survey of 450 C-level executives at B2B providers across the U.S., the study revealed that–despite being a relatively new concept–embedded finance has gained significant attention and traction in the B2B sector, with 84 percent of respondents reporting familiarity with the term and 63 percent already offering embedded finance solutions to their business customers. Further, among those respondents who don’t currently offer embedded finance capabilities, 65 percent were considering doing so in the future, the survey found.

“Those results speak to how quickly embedded finance has become a mainstream concept and how fast it has become a top-of-mind issue for those businesses involved,” said Nick Maynard, head of research for Juniper, during a recent webinar detailing the study findings. “The data show that a lot of U.S. businesses have already recognized the enormous benefits that embedded finance can bring to their operations.”

Benefits of B2B Embedded Finance

Those advantages are being realized through a wide variety of embedded finance use-cases, with payments, employee/employer services/benefits and credit/lending comprising the three most prevalent forms of B2B embedded finance currently offered by survey respondents, the study found.

“Payments is often a really complex process, particularly in a B2B environment, so it’s not surprising to see payments coming out so well there as an area of focus in embedded finance,” noted Maynard. “The significant value that offering payments in an embedded way can unlock is just so notable.”

For providers, the ability to solve businesses’ payment pain points through embedded finance capabilities represents a major opportunity to increase satisfaction for existing clients–and to earn new ones. Among embedded payments-offering survey respondents, 63 percent listed improved client loyalty, experience and retention as a key benefit of doing so, while 59 percent cited increased ability to attract new clients via embedded payments. “It’s clear that payments can really be a pull factor for businesses looking to acquire new customers,” noted Galileo head of marketing Sheri Chin, who co-hosted the webinar with Maynard.

Embedded credit and lending functions also rated highly with providers when it came to client retention and acquisition–ranking first when respondents who were considering launching embedded finance applications were asked which type of service they were currently exploring offering, with 62 percent citing credit and lending tools.

“Given how many use-cases there are here, such as working credit, revolving credit lines, invoice financing and lots of others, this is a massive opportunity,” Maynard said. “Businesses have barely scratched the surface with offering credit and lending in an embedded way. But it can be a bit complex to offer, and that’s what makes choosing the right partner really critical.

Choosing the Perfect Partner

For providers looking to ally with embedded finance enablers, it’s advantageous to choose a single partner that’s able to fill the full range of needs required to support such capabilities, as opposed to arranging multiple partnerships to do so. Seventy eight percent of survey respondents that offered embedded finance services relied upon two or more partners–an arrangement that can lead to unnecessary complexity and risk and negative customer experiences, Chin noted.

“Businesses are cobbling together a hodgepodge of providers that are probably not well-integrated,” said Chin. “Incorporating embedded finance solutions can be a complex proposition unless you have the right technology partner with proven B2B experience and a scalable, flexible, secure platform that helps you build a solution that best meets your customers’ needs.”