Embedded finance allows non-financial businesses to make payments and other financial services simply disappear into the background of the solution being offered to a customer. And its growth trajectory is staggering: the total addressable market for embedded finance will top $7 trillion globally by 2030 with the embedded payment sector in the US forecast at a $300 billion revenue opportunity.
The most visible example of embedded payments that has been experienced by most is Uber, a seamless transaction that actually requires no transacting on the consumer’s part. B2C embedded payments have proliferated from there. Now, unsurprisingly, B2B buyers who require a variety of payment options, including net terms, are beginning to expect that their purchases be transacted with the ease and convenience of an Uber payment.
“Three years of consumer behavior change was squeezed into one year in 2020,” wrote Forrester Principal Analyst Jay McBain. “Consumers are now demanding online experiences, happily virtual, wanting seamless digital procurement and provisioning, and wanting everything at the click of a button. The delta between B2C buyers and B2B buyers has collapsed during the pandemic. It’s all about speed, convenience, and remote, whether the buyer is acquiring a Peloton or a software product.”
These disruptions and revolutionary changes intensify the competition to “own” B2B customers. B2B companies must develop a future-ready and resilient payments strategy in response. And while B2B embedded payments require more expertise and work to satisfy, B2B sellers and marketplaces that meet these heightened expectations will establish stickiness and loyalty with customers, and enjoy cost savings, increased revenue potential and better cashflow.
If your customers don’t already expect their B2B payments to be invisible, they will soon. Embedded payments can enable that invisibility; however, building the capability requires significant work, technical expertise, and a firm grasp of all of the costs that can arise. Here are four important considerations:
- B2B payments should feel like B2C payments. Merchants that can do this will meet the expectations of the digital-first buyer. This can be difficult because B2B payments are far more complex than the transactions and processes that enable B2C embedded payments, which tend to be performed by a single stakeholder (a consumer) using a single payment method (a credit card). Any given B2B transaction may involve multiple stakeholders (the purchaser, the budget owner, the procurement group, the accounts payable team and others) and numerous different payment options (net terms, purchasing cards, and credit cards, among others). Each of those B2B purchasing stakeholders has unique needs and preferences that must be met, and each payment option comes with a unique set of procedural and technological integrations to be managed. Smart B2B embedded payments should help the merchant improve cashflow by allowing buyers to receive invoices daily, weekly or monthly and make payments on terms that they control. It is also critical to allow for ways to add data, like PO numbers, to invoices and support integrations into Procure-to-Pay and Enterprise Resource Planning platforms. The speed and ease of these embedded payments should mask the significant amount of transactional plumbing that must be installed and orchestrated behind the scenes.
- Instant decisioning and credit are key and will help merchants attract B2B buyers and build loyalty. The most effective embedded payments experiences make a company easier to do business with by letting the buyer interact, and transact, on their preferred terms. Business customers prefer to purchase on terms and spend more, more frequently when they have a dedicated financial relationship and credit line with a business. The advantage over competition is significant when customers know they can painlessly purchase from a merchant once they’re ready for more stock. But the credit issuance cannot be too cumbersome or slow. In the move to digital- first interactions, instant decisioning is critical to grab the buyer and the sale.
- Don’t forget A/R when building an embedded finance strategy. All businesses are in the midst of digital transformation and a key part of the embedded payment evolution in B2B merchants is extending to accounts receivable with a 100 percent digital experience and automated onboarding. This can deliver significant time and cost-savings to the merchant – eliminating the need to email forms, wait days for credit decisions, or spend human time on procedures such as creating PDF invoices or performing manual bank reconciliations.
- Protect against the growing threat of business identify theft. As more customers are acquired online and globalization accelerates,there is a growing risk of business identity theft and other forms of digital fraud. When implementing an embedded payments strategy, it is important to work with a partner who can reliably enhance the relationship between buyers and sellers by providing sophisticated fraud detection processes and maintaining a strong track record for risk decisioning.
B2B merchants must be closely in tune with the revolutionary changes to customer experience, engagement and convenience embraced by the rising digital generation and accelerated by COVID. B2B customers are also consumers after all, and they now have the same heightened expectations for seamless, invisible payments in their B2B purchasing that they have come to expect in B2C transacting. B2B merchants must now make it as easy as possible for customers to transact with their brand by embracing the value an embedded payments capability delivers.