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Embedded finance is on the rise, especially in B2B experiences such as marketplaces, apps, and ecosystems. Anywhere B2B payments are happening, buyers and sellers can take advantage of the benefits of B2B marketplace payments. There are many ways to use embedded finance to handle marketplace payments to your advantage, but the way you approach it can help you get paid faster (among other benefits).
What Are B2B Marketplaces, Apps, and Ecosystems?
B2B marketplaces, apps, and ecosystems are digital platforms where businesses offer their products and services to other businesses. Think of B2B marketplaces as the Amazon of a specific industry vertical. B2B apps and ecosystems offer a centralized place to manage various aspects of your business, such as issuing and paying invoices. This setup solves some of the pain points of B2B transactions, by offering a buying, selling, and payment solution all in one place.
It also allows businesses to connect with other businesses they might not otherwise have accessed directly. These gateways provide greater choice, efficiencies, and value to B2B transactions by easing the burden of logistics. They also help make B2B marketplace payments more streamlined and transparent for both buyers and sellers.
Why Embedded Finance Is a Popular Choice for B2B Marketplace Payments
There are a number of reasons why B2B marketplaces, apps, and ecosystems are looking at embedded finance options to handle online payment.
- Growth potential. The COVID-19 pandemic forced businesses of all kinds to bring business online, which served as a tailwind for some B2B businesses to grow – and still is. While B2B had been doing transactions manually before (faxed and emailed invoices, checks, and ACH payments) they had to adapt and modernize due to lockdown restrictions.
- Complete more transactions. Having a payment gateway embedded within the online shopping experience helps increase follow through and stickiness. If a buyer has to go offline to handle payment, such as sending wire transfers, it makes them less likely to complete the transaction. In addition, embedded finance solutions are also important for making suppliers stick around the platforms, with increased transactions and opportunity to deepen their buyer relationships as a major incentive.
- Millennial buying power. Additionally, 73% of millennials in the workforce are now involved in buying decisions for B2B businesses. These people are digital natives, growing up with social media and buying and selling online, and they expect the same seamless online buying or selling journey from their B2B experience that they get in their consumer experience.
- Data and insights. Finally, an embedded finance solution for B2B marketplace payments offers another avenue for gathering information about both buyers and sellers. Marketplaces can then analyze this data in order to make improvements to their experience while offering personalized offerings to buyers so that they can drive more stickiness and transactions.
The Cash Flow Problem Facing B2B Marketplaces, Apps, and Ecosystems
Suppliers expect fast payments and buyers expect net terms, leaving B2B marketplaces, apps, and ecosystems to extend credit. These sort of expectations can create cash flow problems for these platforms, as they extend credit terms to buyers while paying suppliers quickly.
- Extended terms are not uncommon. In many cases, payment terms of 30, 60, or 90 days are not uncommon in B2B transactions, and anyone paying an invoice through a portal still expects them. On the other side, suppliers and the platforms themselves want to be paid immediately.
- Increased risk for platforms. As marketplaces and portals extend the usual credit terms to buyers while paying suppliers quickly, they’re taking on the credit risk themselves, forcing them to do their own underwriting.
- Platforms don’t always want to use their own capital. As marketplaces, apps, and ecosystems extend credit to buyers, their own capital becomes tied up and unavailable – not ideal for quickly growing businesses.
- Risk of debt financing. If platforms do decide to use their own capital, this debt financing weighs down their balance sheets, making them less attractive to investors.
Pay Suppliers – And Yourself – Faster
Embedding instant invoice payments for B2B marketplace payments allows marketplaces, apps, and ecosystems to give suppliers fast payments and buyers flexible terms. It can also remove credit risk, but only if the platform has a partner to do their underwriting.
Here’s how embedded invoice payments work:
- First, the supplier provides basic information to verify their identity, business, and the invoice they want to fund.
- Next, the embedded funding team gets to work and communicates next steps.
- Finally, funding offers are generated within minutes using AI technology, which the supplier can then choose from. Upon approval, funds are deposited in a matter of days.
With fast, flexible payments, you can drive more volume, stickiness, and ultimately growth for your platform.
The Bottom Line
Invoice financing for B2B marketplace payments allows B2B marketplaces, apps, and ecosystems to avoid the hassle of becoming a fintech, while still reaping the benefits of providing fast, flexible payments within their experience.
FundThrough solves many embedded finance pain points while adding more value for buyers, suppliers, and platforms alike. We’ve “been there and done that” when it comes to working with B2B marketplaces, apps, and ecosystems to simplify complex B2B marketplace payments processes typically done offline.
Our product helps level the playing field for small suppliers selling to large buyers by paying their invoices in days instead of months. We also give you revenue share to further fuel your growth.