Embedded B2B finance: The trend explained

We sat down with Serena Wong of American Express and Austin Siegfried of Vartana, who cumulatively have over 16 years of experience in B2B payments, to discuss what B2B payment trends they think will take a forefront in this space. Both agreed that B2B financing services, enabled through APIs, are creating a massive opportunity for B2B companies. In this article, we’re breaking down exactly why.

What is embedded B2B financing?

Embedded B2B financing refers to non-financial brands offering trade credit directly at the point of transaction. We saw this trend in B2C with solutions like Klarna and Affirm being adopted by almost all major retailers. In B2B, as with all payment trends in this space, the most important thing to understand is just how new digital adoption is. But as businesses increasingly grow their online channels, buyers are expecting more sophisticated offerings at the point of purchase.

After all—buyers, whether consumer or business—want a frictionless and easy payment experience. And without in-house financial technology expertise, merchants need to look to third parties to enable the level of sophistication required to bring BNPL to the checkout.  But the growing attention going to B2B financing is about more than one feature or reason. According to Serena and Austin, there are three main factors driving this trend forward in B2B.

1. A GTM strategy for B2B ecommerce payments

B2B financing, or trade credit, is a cornerstone to any B2B transaction. There are many ways that businesses can offer financing solutions. The most traditional is through net terms. But to approve a customer for net terms, businesses need to perform a number of careful risk evaluations. So the decision is usually less than instant for the buyer.

On the other hand, embedded B2B financing solutions help businesses move fast. “Historically, when it came to large organizations, the mentality was always to build in-house. This was because the speed to go-to-market was so incredibly slow just given legacy architecture, strategic investment, and IT prioritization,” says Serena. Now, with API-enabled B2B financing, merchants can meet the digital requirements their buyers expect, while doing so with minimal development resources.

2. The rise of productization

The complexity of B2B financing lends itself well to leaning on a strong technology provider. This is why Serena describes that there's no longer the default of: “Let's build it.” First, companies will look for a partner and then only if it doesn't work, will they do it in-house. Serena describes that this creates a perfect situation for purpose-built fintech solutions – because there is a need for outsourcing every piece of the puzzle, from KYC to fraud detection. 

“I almost feel like the future of payments will be built by non-financial people. It will just be whoever can make the connections. They don't need to have that expertise that traditionally was needed,” says Serena. Instead, they just need to find the right partner. And, with an increasing number of startups dedicated to solving one particular piece of the puzzle, that’s not a hard thing to do. 

3. The consumerization of the checkout: BNPL

The growing number of brands and service providers choosing to function as financers is also fueling the embedded finance trend. “This became clear when about five years ago, Affirm launched with Visa to expand their BNPL offering,” says Austin. This introduced what would become part of a wider move from brands to offer more value at the time of checkout.

Austin explains that over time, “fewer businesses have depended on sales and discounts. Their intention is that if you offer financing, you don't need to discount the product itself in order to get someone to buy it.” In B2B industries, negotiation centers around payment terms: at what interest rate and on what payment schedule.

Embedded B2B financing is enabling that to move online. Why? It's becoming easier for everyone to white-label. Austin explains that this is because you have a number of background players that are providing financing, and all the brand has to do is plug and play. 

As a result, a far wider variety of merchants can offer financial services. You no longer have to be a big retailer like Sears to offer financial services.

“I think it's super interesting that now you have the option to decide whether you borrow or build trust. There are cases where you don't necessarily want a third party like Amex to take your brand recognition—you want to be the one to offer financing. And, that’s possible today thanks to payment gateways and partnerships that weren't there before.” 

An embedded finance solution for B2B

Now more than ever, there is an opportunity for businesses to offer more than just a credit card option online. Buyers across all industries are turning to digital channels and expecting to conduct their payments in a seamless way. And while there are a lot of B2B payment trends out there, embedded finance can be a game changer for businesses.

By providing net terms directly at checkout, with the option to pay later, digitally, via any payment method they want, businesses can not only improve the customer experience, but free up cash flow for their buyers. Meanwhile, rather than being tied up in AR and credit processes, merchants can outsource capital, collections, and risk, and focus on exploring new growth opportunities.

At Balance, we do the heavy lifting so that businesses can offer the best payment service to their customers. And with a white-label B2B checkout, our merchants get to push their brand forward, while benefiting from the loyalty and customer lifetime value that comes with smooth and convenient B2B payments.

Reach out to our team to learn more about how Balance can help you stay ahead of the embedded finance trend and leverage it for your own ecommerce growth.