Embracing embedded finance – time to bring integrated payments into the business process

By Carlo Enrico

Embedded finance may have been a buzzword for years now, but we’re past the point where we should be talking about it as something still looming in the future. The reality is that embedded finance is already here. Our challenge is not to prepare for this potential disruption, but to embrace it, and maximize the truly transformational impact it can have across industries.

In our consumer lives, embedded finance isn’t just commonplace, it’s the new normal. For younger generations in particular, the technology and APIs that allow for seamless payments in apps isn’t a welcome novelty, it’s the standard for how all payments should be, whether they’re ordering food or sending money to a friend. This attitude is filtering into the B2B space, and it’s forcing all of us to adapt.

For industries with long-established processes and systems in place, this change can be a challenge. After all, the commercial landscape is very different to the consumer one. When individual payments can be in the millions of dollars and need to cross international borders, there are a wealth of issues that have to be overcome. The commercial payment ecosystem is fragmented, offers limited visibility into payment status and cash flow needs, and is operationally intensive. The impact is felt beyond the finance department. It hinders growth and affects how commerce is conducted every day.

But digitization has generally been welcomed across so many of our processes as a way of speeding up and simplifying the way we work. Embedding financial services enables customers to access their financial tools directly in the platforms in which they naturally engage without ever leaving it. ?Enterprise Resource Planning (ERP) and Independent Software Vendor (ISV) solutions with seamless payments integration can help to tackle the challenges and unlock new opportunities.

Many corporates of course rely on their business platforms, such as ERPs and ISVs, to efficiently manage their business processes - everything from supply chains, and finance to HR and R&D. Business platforms have a vital role in helping companies to efficiently and effectively manage their resources and improve their performance, but there is always more that can be done. For most businesses, payments themselves still exist outside of the ERP or ISV systems, and this division can be a source of friction, for example when an order happens within the system, but the invoice and payment happen separately.

It doesn’t have to be this way. Recent research by Bain estimates that the B2B embedded payments market will nearly quadruple from $0.7 trillion to $2.6 trillion by 2026, driven by increased platform penetration alongside growing demand and adoption. But creating that scale is the great challenge we face.

We know that corporates are pushing to see more innovation and are waiting on financial institutions to show them that they’re ready to take the next step with embedded finance. Fintechs are rushing to fill the gaps, but corporates also want their banks to have a seat at the table, as they require scalable solutions with a consistent user experience that can account for thousands of large and small suppliers, all over the globe.

The opportunity exists to transform the way we connect commercial trade by transforming the user experience, improving efficiency and transparency, and removing barriers and reducing risk. For every player that comes onboard, the flywheel begins to spin faster and faster, and the collective benefits begin to increase. Not just quicker and more secure payments, but greater data and insights, value added services, even the ability to access credit and financing. We all collectively stand to benefit, the challenge is getting the right infrastructure in place - making sure the players across the ecosystem understand their role to influence change and work together to realize the benefits that embedded finance offers, building partnerships that go beyond transactional relationships.

What does this look like in practice? One of the everyday solutions that businesses are already relying on is virtual cards, a technology that 萬事達卡 has been pioneering for over a decade. Virtual cards are a poster child for embedded finance, playing a crucial role in reducing challenging implementation requirements for institutions and simplifying complex B2B payments for customers. By providing a unique, traceable link through payment cycles, they increase transparency by connecting orders, invoices and payment statuses. They easily track and reconcile payments, bring greater security and offer more controls. Organizations that adopt them can see reduced transaction costs and increased cash flow — a perfect example of embedded finance delivering real benefits.

Mastercard is innovating in all areas to help demonstrate and make real the benefits of embedded finance, from refining established offerings to developing entirely new solutions. We’re creating the tools that will help embedded finance become the force it can be, and helping to educate and onboard the partners that are ready to make the most of this new opportunity.

Over recent months, we’ve announced a number of different partnerships with some of the largest business platforms to expand their offerings and build-in financial services, becoming a true one-stop-shop for their customers, where every aspect of a transaction, from the order to the payment to the reconciliation can be part of a single end-to-end process — no paperwork required.

We’ve also invested heavily in our expertise across different industries, from travel and energy to health and insurance. We’re working in every vertical to understand its needs and challenges, while working horizontally across all industries to find the points of commonality and realize the benefits of a truly interconnected, cohesive economy. Scale comes when we can integrate technology into ERPs and other large platform providers, and support organizations both large and small, regardless of their industry. Ultimately, we are aiming to help our partners deliver consumer-grade experiences in the corporate world.

Embedded finance is already here, but making the most of it is no guarantee. It will take deliberate action, willing cooperation, and clear direction to forge a path ahead and ensure we can all enjoy the benefits it brings.

It’s not a buzzword, it’s a reality. And it’s time to get real.