Related News

Supply chain finance industry hopeful EU will soften late payment rules

Balancing inflation and growth

Late payment issues worsening in global supply chains, Taulia data reveals

IFC joins Taulia as supply chain finance funder

Roundtable: The energy transition speeds up

In today’s digital age, technology has seamlessly woven itself into the fabric of our lives. Modern consumers have come to expect unparalleled levels of convenience, and their demand for a streamlined, hassle-free shopping experience continues to grow. This evolution in consumer expectations is the driving force behind embedded finance, a transformative concept that promises not only to cater to these desires but also to redefine the landscape of commerce itself. As the chief product officer of Taulia, Danielle Weinblatt, uncovers what embedded finance truly entails, how it operates, and the profound impact it could have on global trade.

 

Embedded finance is the art of integrating financial products and services into the core offerings of non-financial companies. Think of it as walking into a bookstore and being able to order a freshly brewed coffee at the same counter where you’re purchasing a captivating new book. Behind the scenes, a separate entity may handle the coffee service, but for the customer, it’s a unified, frictionless experience – a chance to savour a cup of joe while immersing themselves in a literary adventure.

This concept is not entirely novel. Over the years, store cards, car insurance provided by dealerships, and extended warranties for household items have all granted consumers access to financial services alongside their primary purchases. However, recent regulatory changes and technological advancements have ushered in a more sophisticated era of embedded finance. The advent of open banking and the proliferation of application programming interfaces (APIs) have opened the door for companies to seamlessly integrate diverse financial services into their existing offerings.

The growth trajectory of embedded finance is nothing short of remarkable. In 2021 alone, financial services worth a staggering US$2.6tn were embedded into e-commerce and various software platforms. These figures are projected to soar, potentially surpassing US$7tnby 2026, accounting for over 10% of the total transaction value in the US.

Embedded finance takes on various forms, from embedded payments, which expedite online transactions with a simple click, to embedded insurance, investments, and lending. A prime example is the buy now pay later (BNPL) model, where customers are given the flexibility to spread the cost of a purchase over a designated period.

The benefits of embedded finance are a win-win for both companies and their customers. Customers gain access to financial services, such as payments and insurance, without the inconvenience of switching between platforms or dealing with multiple service providers. This translates into enhanced convenience and an elevated customer experience. For businesses, the potential is equally enticing. They can diversify revenue streams, bolster customer loyalty, and streamline the overall customer journey. Moreover, by tapping into a wealth of customer data, companies can offer personalised services, further strengthening their competitive edge.

While the embedded finance phenomenon has predominantly focused on consumer applications, its gaze is now shifting towards the realm of B2B interactions and corporate finance. B2B embedded finance promises to expedite transactions, facilitate financing between trading partners and lower trade barriers. With real-time data harnessing capabilities, companies can optimise processes and access financing solutions seamlessly through B2B platforms. Financial institutions and fintech companies are poised to revolutionise risk assessment, potentially reducing financing costs for businesses. The applications are diverse, encompassing embedding financial services within B2B transactions, streamlining payments, expediting credit decisions and expanding access to working capital.

However, successful implementation hinges on seamless partner connectivity. Taulia, acquired by SAP last year, stands at the forefront, offering embedded working capital tools that trim costs and accelerate liquidity flow. Their deep integration with ERPs ensures accessibility and efficiency while diminishing the risks and expenses associated with manual workflows.

Beyond just enhancing customer journeys, embedded finance revolves around harnessing the wealth of available data. Taulia, for instance, capitalises on invoice data to provide suppliers with more affordable financing options. The greater visibility funders have within Taulia’s platform and ERP, the more confident they become in making financing decisions.

In essence, embedded finance is not only about optimising customer experiences and expanding access to additional services. Concerning trade, it assumes a pivotal role in informing decision-making and democratising access to finance. It heralds an era where convenience and financial empowerment coexist harmoniously, promising to reshape the way we do business and interact with financial services.

Danielle Weinblatt will be present at Eurofinance International Treasury Management in Barcelona from September 27-29.