Big surge in B2B embedded finance demand, new research finds

By Gaia Lamperti

2021 has been the year of embedded finance and a trend that picked up the pace very quickly in this segment is B2B offerings. Business embedded finance payments are expected to triple, while lending is projected to grow fivefold by 2026.

In particular, new research conducted by Juniper Research in collaboration with Galileo Financial Technologies, a FinTech company owned and operated by SoFi Technologies, revealed that most US B2B businesses are not only familiar with embedded finance, but they are already offering an embedded finance solution.

The research, published as the Galileo Embedded Finance Report, highlights the inherent need for those businesses to offer embedded finance solutions to better enable payments, payroll, credit and lending, insurance, banking and other financial services across the B2B industry. The top three critical business pain points being solved by embedded finance today are customer retention, cash flow management and revenue growth.

“Customer retention, a major pain point for businesses, can be significantly enhanced through embedded finance tools. This is a critical differentiator that businesses must leverage, or they will be left behind,” the report explained. Among the 63% of businesses that use embedded finance today, the majority (78%) work with two or more providers to enable their solution, with FinTechs being the top preferred provider.

“The dramatic rise in the adoption of digital payments among both consumers and businesses has enabled people and businesses to do more with technology than ever before—paving the way for enormous growth for embedded financial services,” said Seth McGuire, CRO of Galileo Financial Technologies. “The market has evolved at lightning speed and this new research confirms that forward-thinking B2B executives are embracing embedded finance solutions as a key part of their growth strategies.”

What is driving B2B embedded finance?

The report surveyed 450 C-level executives in B2B businesses across the country and asked them about their attitudes towards embedded finance, what types of financial services they currently or want to offer, how many providers they use, who they prefer as their embedded finance partner and what value embedded finance solutions provide to their clients.

“Customer retention, a major pain point for businesses, can be significantly enhanced through embedded finance tools. This is a critical differentiator that businesses must leverage, or they will be left behind,” said Nick Maynard, study author and Head of Research at Juniper Research. “As the demand for digital services continues to grow rapidly, there is a significant market opportunity for businesses who go to market in an efficient, scalable manner.”

The research also explored why businesses are gravitating toward embedded finance, the newest use cases for US B2B embedded finance and how the B2B embedded finance market is catching up with B2C offerings.

A key factor driving the adoption of embedded finance is that the technology provides companies and their customers with access to instant payments that are simple, low-cost and reliable. As such, API technologies are becoming more widely used, with about two-thirds of banks eyeing these technologies to aid the “consumerization” of B2B payments. Indeed, the most common use cases include offering third-party payment options such as fixed-rate instalment loans or BNPL options.

Key findings

• 85% of B2B businesses are familiar with the concept of embedded finance
• 65% of those not currently offering an embedded finance solution are now considering offering one
• 68% would prefer to offer embedded finance services from a non-bank provider
• Payments, employee/employer services and credit and lending solutions are the top three use cases in market today