Embedded finance to ignite sluggish B2B payments in Europe


image of the Terms.Tech 'T' logo shaped in waves representing buy now, pay later

There’s no doubt about it, now is an exciting time for embedded finance in the B2B space! Businesses have always been looking for ways to streamline their operations and improve cash flow.

Embedded finance like Buy Now, Pay Later (BNPL) solutions are not only becoming popular throughout Europe, but are increasingly expected as payment options in B2B marketplaces. Risk-savvy frictionless finance is the future – and now!

Considering the Trade Finance Gap is now up to about 2.5 trillion USD globally, it’s no wonder companies are looking for more efficient ways to get the financing they need, or to find more efficient payments solutions.

What does embedded finance mean?

Let’s define embedded finance for those who may not be so familiar with it. Embedded finance refers to financial services that are integrated into non-financial products or services. In the B2B context, this can mean offering credit or BNPL options directly within your software or platform, such as a digital marketplace. 

From B2C to B2B – embedded finance is the next big thing

Embedded finance solutions have become commonplace in your daily B2C experience. Think about when you buy a flight ticket and the airline’s platform offers you flight insurance just before you’re ready to buy the ticket. That’s B2C embedded insurance! Or, you’re doing some online shopping and you get an option allowing you to split payment over 4 months. That’s B2C Buy Now, Pay Later! We almost take these options for granted now. 

As BNPL solutions are becoming increasingly popular in the B2C space, it’s not hard to see why. Offering consumers the ability to pay later without the high rates of credit cards or splitting payments into smaller, more manageable amounts can boost sales and improve customer satisfaction. It’s no wonder that BNPL is starting to take off in the B2B space, too. B2B buy now, pay later options can be similarly beneficial. Businesses can offer their customers flexible payment options without taking on the risk of extending credit themselves.

Buy now, pay later is taking hold in the B2B space

Digital technology allows non-financial businesses to integrate embedded financial services into their software or platform. What does this really mean? For example, look at B2B marketplaces – you go to checkout and you have various payment options. One payment option might be a buy now, pay later service. 

A typical BNPL solution appears as an option for the customer at check out. The buyer can select it, get a quick credit decision, set up the payment terms and purchase the goods. All of that is done in the environment of the marketplace platform – no sitting around a table, no extensive paperwork, no long wait for the credit decision. This integration and ease of use can lead to an increasing transaction-based revenue stream.

8 embedded finance examples in the B2B space

While buy now, pay later is just one example of an embedded finance solution, there are plenty of other opportunities.

  1. Payment processing allows businesses to easily send and receive payments.
  2. Supply chain financing, including inventory financing, invoice financing, and purchase order financing. Some BNPL solutions focus on these aspects of trade.
  3. Foreign exchange (FX) solutions to manage currency risks in international trade.
  4. Accounting and bookkeeping solutions to increase recordkeeping efficiency.
  5. Credit and lending solutions for lines of credit, term loans, and equipment financing helps businesses gain access to capital needed to grow and expand. Other BNPL solutions emerge from this category of embedded finance.
  6. Insurance solutions can help businesses rest easy by offering targeted insurance for what is needed at that moment of purchase, e.g. cargo or delivery insurance.
  7. Investment management solutions can include robo-advisory services and investment tracking tools. 
  8. Financial planning and analysis tools help businesses make better financial decisions and optimise their performance.

Embedded finance for SMEs

Although credit solutions have long been a staple of B2B finance, with embedded finance the process is modernised and becomes relatively seamless. By integrating credit and payment options into a software or platform, businesses can quickly and easily apply for credit and receive funding without ever leaving the platform. This can be especially useful for small and medium-sized businesses that may not have the time or resources to go through a traditional lending process. 

5 risks associated with embedded finance

Embedded finance is having a moment! But, of course, as with any financial product, there are risks to consider. But as embedded finance continues to evolve, we can expect to see more sophisticated risk management tools and safeguards put in place. Meanwhile, here are five possible risks with embedded finance solutions.

  1. Security and Data Privacy. Embedding financial services within a software platform creates potential vulnerabilities that could be exploited by cybercriminals.  It’s important to assess what protections your embedded solution offers.
  2. Compliance and Regulatory Risks. The integration of financial services within a software platform creates a need for compliance with financial regulations and guidelines. Businesses must ensure they are complying with relevant laws and regulations, which could vary by jurisdiction.
  3. Credit Risk. Offering credit to customers can be risky for businesses, especially if the customers are unable to repay the loan.
  4. Operational Risks. Embedding financial services within a software platform creates additional operational risks, such as technology failures or system errors. Businesses must ensure that their systems are reliable and can handle the increased workload.
  5. Reputation Risk. Any financial product or service carries the potential for reputational damage if something goes wrong.

An embedded payment terms solution for you!

Terms.Tech is a cutting edge credit solution, providing B2B marketplaces and businesses the chance to improve cash flow, reduce friction in payment processes, and ultimately drive growth. Traditionally, your business needs multiple companies (e.g. a bank, an insurance company, other financial institutions) to make B2B purchases with payment terms. 

Terms.Tech, however, is a TradeTech solution providing a one-stop shop to help businesses and marketplaces with their digital transformation. It streamlines the process and enables companies to apply, receive a decision, and buy right at checkout. 

Some of the great benefits that Terms.tech’s buy now, pay later solution provides include:

  • Liquidity and payment terms
  • Instant credit decisions and underwriting
  • Risk management
  • Credit collection
  • Reporting
  • Customisation and brand control (Yes, Terms.Tech is a white label solution!)
  • Easy-to-integrate REST API
  • The comfort of knowing your cash flow is healthier
  • The pleasure of watching your revenue stream increase

Of course, we advise that anyone considering adding a BNPL option to their marketplace, or making purchases through one, should evaluate the terms and conditions of the provider (interest rates, fees, repayment terms, collection policy, etc.).

If you’re a seller who wants to embed a BNPL solution for your customers, make sure you focus on delivering top-notch customer service by clearly communicating the availability of the BNPL service and the pros and cons of using it.

🤝 Why wait to find out more? Get in touch with our Terms.Tech consultants and see what the best BNPL solution is for you.