How Embedded Finance Modernizes Business Payments

Business-to-business (B2B) transactions are notorious for various pain points and paper-laden processes that, from invoices to paper checks, result in late, and even lost, payments.

Taira Hall, senior vice president of B2B and strategic innovation at FIS, said that embedded finance — integrating payments directly into apps, platforms and even invoices — can help modernize and contextualize interactions between buyers and suppliers, radically changing the way that consumers use financial products today.

Hall noted that the financial services industry is going through “a rapid evolution,” accelerated by the COVID-19 pandemic, and embedded finance is now becoming the “connective tissue” that can enhance banks’ end customer experiences.

Embedded finance offers financial services at the existing point of presence for the commercial client, whether that be a large corporate or a small- to medium-sized business (SMB). This means financial services are delivered to the experiences the client is already using, such as software applications, FinTech mobile apps, banking portals and the like.

For the first time, these financial services will be be able to be offered in place — including everything from opening a business checking account to invoicing, payment acceptance, paying bills and accessing credit.

Until recently, enterprise back-office solutions have focused on operations, workflows and solutions providers might offer a product or software geared toward lending or payments.

But with embedded payments, Hall said that, especially for smaller companies, “I see a future state where we have a single pane, which means that a business customer can be served from all financial aspects.”

Serving that smaller enterprise can mean everything from seamless onboarding to proactive financing offers offers and access to a pre-approved line of credit — all critical elements to power the SMB experience and help them better manage their financial health.

As Hall told PYMNTS, an optimal solution “brings all of these capabilities together in one centralized location that helps business customers navigate what is most important to them in growing and operating their businesses.”

Of course, reconciliation back into the accounting solution remains a key challenge — which necessitates that ideally, B2B firms should be engaged with verticalized software players and technology platforms.

As an example, Hall explained that FIS serves enterprise clients at their “point of need,” through an integrated experience that is device agnostic and offers full visibility into cash flow, all the way down to the accounting level, with transparency into bank and transactional data.

Using the Dashboard for Granular Insight

“A dashboard lets them see in near real-time how their business is operating,” Hall said. This can be critical, given the fact that many firms must navigate the realities and challenges of fixed expenses coupled with variable income — and they spend 12% to 30% of their time on financial tasks.

Verticalized software platforms and online portals can give business owners back significant amounts of time by providing centralized insights. Moreover, it can allow buyers to pay their suppliers with the optimal form of payment, such as cards, to increase cash flow or split invoices into multiple payments.

Along the way, said Hall, embedded finance can “equalize the relationship” between buyers and suppliers, due to intelligent routing, along with discounting options for speedier payments — and with the supplier able to signal their own preferred payment methods.

When asked about verticals that might benefit most readily from embedded finance, she pointed to property management, healthcare, service-based companies and a wealth of traditional industries populated by smaller firms that need better visibility into cash flow.

Those tech-enabled options, she said, are attractive to traditional financial institutions that seek new opportunities to bring stronger sets of services to their small business customers, partnering with FinTechs to power distinct and customizable customer experiences.

Embedded finance is rapidly coming into B2B, and there is a prime opportunity to help craft the narrative and serve our customers holistically across that ecosystem.