And as the B2C embedded finance market changes, so too does the B2B one. The latter simultaneously learns from the former whilst developing solutions specific to the embedded finance journey of its users.
Differences between B2B and B2C embedded finance
B2B embedded finance solutions often need to accommodate the specific industry, size, or business model of their users. They are also likely to take on risk with customers who require larger amounts of credit.
By contrast, B2C solutions are typically much more likely to be one-size-fits all models. B2C vendors can similar amounts of products and services to most clients. Having a larger number of customers makes them less prone to the effects of individual clients defaulting.
Suppliers’ approval conditions and payment schedules vary according to industry and customers. However, net 30-, 60-, or 90-day terms, are common.
Unlike standard bank loans, trade credit doesn’t always involve an intermediary. But there are third-party specialists with advanced technology and knowledge that provide white-label services.
Credit lines in business are flexible loans for borrowing credit up to a pre-agreed limit. They provide a source of funds that’s quickly available and is there for useful for helping manage cash flow or covering unexpected costs.
Unlike trade credit, credit lines are not tied to specific transactions or goods.
Invoice financing refers to the selling or borrowing against outstanding invoices to gain access to credit. Third-party invoice financing companies enable this by providing capital upfront.
Invoice financing comes in two main forms:
Invoice discounting: Businesses using unpaid invoices as security or a type or desposit for obtaining loans. It provides them with quick access to most of the value of an invoice.
To put it another way, the basic system is the same: businesses buy things now, and pay them back later in interest-free installments. They also share the same core technology fundamentals, such as point of sale (POS) systems and online gateways,
However, they differ in purpose, process, and payment terms. For example, it’s often necessary to provide longer payment terms in B2B payments and involve more decision-makers and diverse payment methods.
3. B2B insurance
B2B transactions often carry risk because of the large payments involved and the consequences of losses. And the potential for losses is often high because of factors such as:
Long and complex logistics and supply chains
Regulatory requirements and changes
Customized products or services (i.e., products with higher chances of not meeting customers’ expectations)
This makes specialized insurance offering a necessary precaution for many B2B suppliers and customers.
It also simplifies the order-to-cash process for B2B customers by integrating purchase controls and offering trade credit and net terms – features which can increase average order value (AOV) and customer lifetime value (LTV).
Our platform’s integration with APIs for eCommerce, accounting software, and other payment providers and gateways is seamless. It supports frictionless purchasing capabilities and consistent branding for all business sizes, as well as customizable payment methods and communication channels.
The growing popularity of embedded finance solutions in B2B commerce is transforming how businesses manage financial transactions.
It is driven by expectations from customers for convenience and efficiency, brought over from the B2C domain, and innovation by businesses.
B2B embedded finance requires a more nuanced approach than the B2C version. It needs to be tailored to meet the specific needs of businesses. This applies to all aspects of it, including:
Seamless payment solutions
Flexible financing options like trade credit and invoice financing
Specialized business insurance products
Companies that adopt these solutions can simplify their own processes and enhance customer satisfaction and loyalty.
This shift is crucial for businesses looking to stay competitive as increasing digitization and new software platforms proliferate.
As this trend continues to develop, it will undoubtedly unlock new opportunities for growth, efficiency, and innovation in the B2B sector. This in turn will solidify embedded finance as a key component in the future of business transactions.