Embedded financial products for improved SMB performance are crowding the market

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Since embedded finance is drastically changing the way businesses make transactions and maintain working capital, smaller and medium-sized businesses (SMBs), are utilizing the opportunity to offer financial services to expand their business and drive growth. Consequently, several fintech platforms are launching products for these SMBs and in turn generating new revenue streams. For instance,

• In October 2022, Adyen, a global fintech platform, introduced two unique embedded financial products - Capital and Accounts in the United States and European markets. Since there has been an increasing need for embedded financial services by several SMBs, Adyen brought these products to provide SMB users with the utmost financial experiences. Notably, Adyen launched financial products which include cash advances, business bank accounts, etc. specifically for all the platform and marketplace businesses in these regions.

Adyen, in partnership with Boston Consulting Group, conducted a study that revealed that more than 60% of SMBs are interested in such embedded financial services. Importantly, more than 50% of the platform users are eagerly waiting to switch financial services providers for a better-integrated business processes solution. The main objective behind the switch is the underperformance or low performance of SMBs. The traditional financial services had always been suffocated by reactive approaches, lack of vertical knowledge, slow approvals, and many more, leading to the underperformance of SMBs.

Dutch fintech, Adyen came up with the product Capital since more than 90% of SMBs revealed that they are interested in cash advance solutions. Since it would be helpful for SMBs if their loans are being pre-approved, Adyen designed Capital to enable platforms to offer business financing based on historic payment data. Additionally, more than 70% SMBs give importance to an integrated bank account experience and thus Adyen designed an Accounts product to help users to run their finances and get access to funds instantly. Consequently, Adyen’s products will help in completing the offering by enabling the users to spend their capital on various platform-branded payment cards. 

Thus, post-adoption of Adyen’s products, platforms will be able to tap the growing user demand by embedding financial services via a single integration. PayNXT360 anticipates, through its investment in banking licenses and industry-leading technology, it will be able to capture significant market share over the next four to six quarters in the region.

• In October 2022, B2B payments platform Plastiq also entered into the embedded finance space, with its Plastiq Connect embedded finance product. This product especially offers a user interface (UI) that can be embedded in platforms and requires very less development time. Now, with this new product, several platforms will be able to provide multiple payment methods and disbursement options to their customers. This will ease out the payment process to be made by business customers to their suppliers at the same time get paid by their customers. 

Notably, Plastiq Connect is designed on a buyer-funded model of credit card acceptance, which removes the requirement of a traditional supplier-funded one. Consequently, Plastiq will help several businesses to utilize working capital, and explore newer lines of credit together with the deployment of digital bill pay and accounts payable (AP). Thus, SMBs will now be able to use the existing credit cards to pay their suppliers and vendors who otherwise might not have accepted those cards. Without worrying about the approval of bank loans or loans from other sources, SMBs can now easily get access to short-term working capital.

It is seen that the businesses which are trying to enter the financial services market are spending huge amounts on buying financial services technology. Plastiq Connect, on the other hand, is providing an avenue for these businesses to see growth through partnerships with products Plastiq Connect. Consequently, PayNXT360 expects, as newer innovative products will be launched, more partnerships and collaborations with these embedded platforms will be witnessed in the market.

• Similarly, several fintech firms are launching unique tools to facilitate the adoption of embedded finance products for SMBs. For instance, a Nigerian fintech firm, Vella Finance, launched a new user interface and new products in October 2022, for its platform to enable easy cross-border payments for SMBs in Africa.

These new products include Global Pay, and Vella Boost, which will help these businesses with alternative payment solutions. Consequently, Vella designed its product Vella Boost which provides fintech-as-a-Service (FaaS) solutions thereby enabling SMBs to become crypto-enabled to manage the embedded finance offerings, wallets, and other payments much better. Additionally, this tool also enables these businesses to invest funds that are not being used otherwise. On the other hand, the other product, Global Pay helps several SMBs to send money to their partners in around 80 countries.

With the rising usage of cryptocurrency, Vella strategized to narrow TradFi with DeFi and bring cryptocurrency rails into the market to provide these SMBs with alternative payment solutions. Since working-age adult entrepreneurs are more in number in Africa as compared to any other continent in the world, PayNXT360 anticipates because of these new products, Vella will see strong adoption over the next few quarters in the region.

• To boost SMB offerings, several embedded banking solutions providers are partnering up with traditional banks. For instance, in October 2022, embedded banking solutions provider, BankiFi entered into a partnership with Florida-based Axiom Bank. Under this partnership, the bank, with the help of embedded banking services will be able to offer improved business finance tracking and management solutions to its SMB customers. This, in turn, will help the bank to capture more SMB customers across the country.

Since BankiFi’s Open Cash Management platform can get integrated with major accounting software in the United States, such as QuickBooks, Xero, and many more, BankiFi’s product is expected to attract many partnerships and collaborations. Notably, BankiFi’s embedded finance platform offers solutions in the form of collection, reconciliation of invoice payments, etc. very swiftly and efficiently. Moreover, it also provides automation of data integration, business insights, and many more which many banks are unable to offer this support effectively. Consequently, traditional banks, which are witnessing a reduced need in recent times, are strategizing to partner with embedded platforms to attract more SMB customers. Specifically, it is the first collaboration of BankiFi in the North American region and PayNXT360 expects this will help SMBs, based out of the United States to boost their businesses over the longer run.

To know more and gain a deeper understanding of the global embedded finance market, click here.