Embedded finance
Embedded finance

B2B embedded finance: the next big thing for retail and e-commerce platforms

Find out how embedded finance solves major challenges for SME merchants, and creates a win-win scenario for finance providers.

Interest in embedded finance is spiking in the e-commerce and retail industry as awareness of its benefits grows. With the rise of BNPL, retail and e-commerce platforms are well aware of embedded finance offerings.

Yet while they’re providing seamless financing solutions to consumers, very few are providing B2B embedded finance offerings to merchants.

So, what’s holding them back?

There are a few key reasons:

  • Not understanding the size of the opportunity with embedded finance
  • Not understanding the need for embedded finance
  • Not knowing there are specialist third parties that can help

Let’s take a look at how the market is changing, how embedded finance solves major challenges for SME merchants, and creates a win-win scenario for finance providers.

How the retail market is changing

The growth of retail e-commerce is booming. Marketplaces such as Amazon Marketplace, eBay, Etsy, Walmart Marketplace, and Wayfair continue to capture a significant share. In fact, McKinsey expects 50-70% of e-commerce to be conducted on these platforms by 2025.

Seller-enablement solutions such as instant payouts and seller financing represent a large and underserved value pool. But platforms like Amazon and eBay are changing this for merchants in the retail space by using embedded finance solutions.

How? By providing quick access to flexible finance and without demanding lots of checks or security against assets (that they may not even have).

What’s also shaping the market is consumer behaviour. While online purchasing was spurred by the pandemic, it's not showing any signs of slowing down. In fact, the purchasing of smartphones and tablets globally is contributing to this.

The market is expected to pass $432 billion in 2022, up from $148 billion in 2018.

With this growth, competition created via social media marketing campaigns is expected to shake up the market and drive retail growth further. The companies that don’t adapt will lose out.

And while this trend will inevitably increase the use of BNPL finance solutions, there are so many embedded finance options you can use to support merchants in fulfilling this demand.

💡 📕 Further reading: You can find out more about embedded finance options here.

The challenge for underserved merchants

The merchant market is largely underserved. That’s because traditional lenders have set criteria to help them risk assess. With merchants often having less business information available and less/no assets to secure financing against, it creates a barrier to funding.

With embedded finance solutions, there are minimal credit requirements which enable unbankable merchant business owners to gain the funding needed, even with credit challenges. Access to quick finance helps them to support new staff recruitment (say 28%), improve productivity with new equipment (say 38%) and much more.

The B2B embedded finance opportunity

The key to maximising the opportunities presented by the retail e-commerce market is to provide the best customer experience. Yet, offering smooth, seamless ordering and shipping experiences that consumers expect now requires both emerging and established merchants to have swift access to capital needed to keep stock and inventory on the move.

That’s why technology platforms and payment service providers play an increasingly important role in supporting growth through business finance embedded in their core solutions. Essentially, fast and fair embedded finance can unlock significant potential for merchants.

Times are changing too. From previously having a lot of power over suppliers, merchants are in a vulnerable position with suppliers carrying the power. But with the embedded finance ecosystem, merchants can overcome these issues. Embedded finance enables them to access and gain funding on the platforms/sales channels they use could benefit businesses as they work to keep pace with growing demand.

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