Tomer Barel is the chief operating officer at payments services company Melio.
Increasingly, businesses want all of their financial tools embedded in the same user interface. From lending to payments to open banking, businesses are demanding more user-friendly solutions that will save them the hassle of keeping track of dozens of different financial tools.
Particularly for America’s 32 million small businesses, there is a pressing need for simplified financial systems that allow employers to save time and money, especially as 75% of small business owners report that their businesses’ financial health has been negatively impacted by record-high inflation over the past six months. Cash flow and workflow issues continue to be a main area of concern for small businesses, most of whom do not retain in-house accountants to handle their finances.
According to the U.S. Census Bureau, 5.4 million new business applications were filed in 2021, far surpassing the former record of 4.4 million in 2020. Many of these new businesses were started by workers who left their jobs to establish enterprises that better aligned with their passions.
But when these business owners begin managing their finances, they are often surprised to learn that the user experience they have grown accustomed to as a consumer is often unavailable for businesses. The gap in ease of use and simplicity when transitioning from a consumer app such as Venmo to business solutions can be jarring.
In the business-to-consumer market, embedded finance is now the status quo, with a number of embedded finance players helping brands deliver complementary products within the same user experience. Brands like Apple, Square, and Uber offer services either built in-house or serviced by a third party that enable customers to make purchases and store funds seamlessly.
Unfortunately, the business-to-business market lags behind its B2C counterpart and is only just beginning to embrace embedded finance. The reality is that marketplaces and platforms have yet to meet businesses’ accounts payable and receivable needs in one place.
Truly, the market for small businesses is smaller than the consumer market. And the complexity of B2B payments is significantly higher and that market is fragmented. But those who are successful in transforming the complexity into a simple, smooth experience are likely to win this growing segment.
Often, a small business owner has to take many steps to send and receive payments, including transferring money to their bank account, making an account payable via a stand-alone website, and generating an invoice on a separate platform. With no connective tissue between these crucial features that a business requires to stay afloat, business owners spend much of their valuable time in the back office instead of identifying new ways to grow their revenue.
However, when consumers shop online, they are no longer faced with just one payment option. Payments technology is now embedded into the checkout experience, with consumers often having the option to pay now or later, using their preferred payment tool.
Embedded finance is all around us as consumers and we have gotten used to it – for good reason. Now it’s time for small businesses to benefit from this experience as well.