The Emergence of Buy-Now-Pay-Later and Embedded Finance for B2B
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Fact-checked by: Bruce Sayer
The emergence of buy-now-pay-later and embedded finance for B2B is transforming how commercial transactions are being executed.
For direct-to-consumer companies, the notion of embedded finance is nothing new. Solutions like buy-now-pay-later programs have taken flight in online marketplaces and shopping sites and are becoming somewhat table stakes for conducting business on the web or through native apps.
For clarity, embedded financing is the integration of financial services, such as payments, lending, credit management, etc., into traditionally non-financial platforms or services. From Amazon to Apple, all major B2C platforms have adopted it.
But how does this concept translate into the B2B landscape? Generally speaking, we are seeing the following themes emerge:
- Buy-now-pay-later (BNPL) providers disrupting commercial lending options for B2B,
- Commercial lending moving to tech platforms that control points of experience,
- Data transparency being key to unlock credit decisioning, and
- Embedded finance solutions driving down the overall cost of capital.
These are all promising and exciting prospects, but embedded finance solutions will not scale unless they have the right credit and risk management capabilities. Furthermore, it will be a prerequisite for any platform provider deciding to enter or expand into embedded finance, to acquire, build, or partner with someone who can help them manage risk.
eCapital and Embedded Finance
From providing credit monitoring to lending for our accounts receivable customers to offering total payments management for our accounts payable customers, eCapital is leading the way to building the next generation of working capital finance and payments platform. Embedded finance has become a natural extension for eCapital to further reduce friction for buyers and sellers and allow them to better appreciate their credit dependency on each other and over time, optimizing their working capital. We currently see four embedded finance avenues related to revolutionizing payments and lending and simplifying the processes that help companies prosper and grow:
- Billing and Payments
- Accounts Payable Automation
- Accounts Receivable Automation
- B2B Marketplaces
Billing and Payments
Businesses are using numerous systems to manage different aspects of their operations. Billing and payments systems are two of the most common types of solutions used. Billing software organizes and automates the billing and invoicing process. This helps ensure timely and consistent collection of payments and reduces errors due to manual data entry. A B2B payment system is an automated system that facilitates payments between businesses using ACH, credit cards, checks, or wire transfers.
These systems create great opportunities for embedded finance solutions. For example, LexisNexis CounselLink provides a platform for law firms or corporate legal departments to gain 100-percent visibility into all matters and spend. eCapital FastTrack is embedded in CounselLink for law firms to simply present and request early payments on approved invoices (for participating clients) directly from the platform they already use. The client then accesses third-party financing through eCapital to make payment to the law firm and the client then pays eCapital on agreed terms.
Accounts Payable Automation
Accounts-payable (AP) automation has become one of the most powerful, time-saving tools for the finance departments of companies of all sizes. Automated AP software helps businesses manage and pay for invoices in an organized, timely manner for the precise amounts, while saving on computing time and resources, vendor fees, lost invoices, and human error.
eCapital and Esker recently announced this type of integration of their respective platforms to allow existing Esker customers to seamlessly embed buy-now-pay-later (BNPL) based working capital and cash management solutions with minimal training for buyers or sellers. When combined, Esker Pay and eCapital FastTrack create an embedded finance solution that will help buyers and suppliers better manage credit, terms and working capital.
Accounts Receivable Automation
Accounts receivable (AR) automation software helps companies optimize their customer invoicing and payments processes. This type of software is used to streamline the financial transactions between a company and its customers. AR automation simplifies the processing of large volumes of customer invoices, which can significantly reduce the time spent collecting payments from customers. In all, automation means better AR management through improved collection, cash posting, customer credit insights, and improved net-terms management.
Integration with an AR automation system would allow a seller to get paid faster, directly from their automation platform, with immediate posting and reconciliation to their general ledger accounting system. For example, in a situation where a seller has a receivable that they’re waiting on payment for 60 or 90 days, embedding eCapital FastTrack gives that customer an option to get paid right away on any invoice while presenting flexible net-term options to their end customers, be it 30, 60 or 90 days. Through this embedded finance solution, eCapital collects from the customer on their original or newly set terms and provides ultimate flexibility for net-terms and B2B credit management.
B2B Marketplace
A B2B marketplace is a platform that allows companies to connect with other organizations and conduct business in one place, ideally online. Like a traditional B2C platform, B2B marketplaces are where companies buy and sell products, only the sellers are distributors, retailers, brands, or manufacturers selling to other businesses.
In this embedded finance scenario, eCapital is integrated into the marketplace and serves as the data, credit and risk management platform behind the scenes. With 19-plus years of transactional, credit and industry vertical data from a massive network of buyers and suppliers, eCapital is uniquely positioned to provide marketplace businesses with insights into, and recommendations for, customer credit and payment terms to help retain and grow revenue.
Conclusion
As we embark on further digital transformation and as data, credit and risk management practices become more sophisticated, technology platforms will have a unique opportunity to help any business with better credit, net-terms and working capital management. eCapital is in a unique position to capitalize on the embedded finance and has the fundamental underpinnings to help companies tackle the current landscape and adapt to these changes.
Key Takeaways
- Embedded financing is the integration of financial services, such as payments, lending, credit management, etc., into traditionally non-financial platforms or services.
- Embedded finance has the potential to reduce friction for buyers and sellers and allow them to better appreciate their credit dependency on each other and over time, optimizing their working capital.
- eCapital is in a unique position to capitalize on embedded finance and has the fundamental underpinnings to help companies adapt to buy-now-pay-later practices.
ABOUT eCapital
At eCapital, we accelerate business growth by delivering fast, flexible access to capital through cutting-edge technology and deep industry insight.
Across North America and the U.K., we’ve redefined how small and medium-sized businesses access funding—eliminating friction, speeding approvals, and empowering clients with access to the capital they need to move forward. With the capacity to fund facilities from $5 million to $250 million, we support a wide range of business needs at every stage.
With a powerful blend of innovation, scalability, and personalized service, we’re not just a funding provider, we’re a strategic partner built for what’s next.
eCapital Corp
eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.
