How and Why Embedded Finance Is Essential for Tech Companies

Embedded finance is not just a buzzword. Many technology companies, including SaaS, DSPs and marketplaces, use it as a tool to enhance their growth and financial performance. Get a deeper understanding of embedded finance, which includes payment processing, insurance, banking products and invoice financing, and find out how it has transformed the way companies operate on a daily basis.

Are you wondering how to improve customer satisfaction and generate growth within your company? Embedded finance can benefit many departments in your company, from sales to revenue operations to tech. Read on to learn everything you need to know about embedded invoice financing.

1 – What Is Embedded Finance and How Does It Work?

In today's market, many companies are able to offer financial services similar to those provided by fintech startups. They are able to do so by integrating finance tools directly into their commercial products. This technological evolution has opened up possibilities for a variety of SaaS companies specialising in different areas, as well as intermediary companies such as digital service providers (DSPs), marketplaces and agencies. Banks are no longer the only players in financing—this is what embedded finance is all about.

1.1 – Embedded Finance: Definition

As the term implies, embedded finance occurs when financial products are integrated directly into a service that is offered to a customer. Initially, this process started with payments and SEPA, but it has quickly evolved to include open banking and many other ancillary services.

With this system, users of a B2B SaaS or marketplace can access financial products without ever having to interact with a traditional bank. They can order a payment card, opt for instalment payments, or choose an insurance product directly on these service platforms.

1.2 – How Embedded Finance Works

Embedded finance professionals provide online platforms, such as marketplaces or SaaS, with the ability to incorporate financial solutions into their products through APIs (Application Programming Interfaces). Companies can benefit from the power of advanced technology without the need for any specific technical development internally.

With just one click, users can access an instant payment button, request a virtual payment card, or choose insurance to cover their purchases.

1.3 – Open Banking and Embedded Finance

As implied by its name, open banking refers to the service where banks operate in an open manner. This means that customers can access their banking information and share it with third parties with their consent. These third parties can then exploit the data they have access to through the means of APIs.

Financial APIs make it possible to connect non-bank structures with banks. Therefore, open banking has allowed embedded finance to integrate into many web apps. This makes for a better digital customer experience when using financial services.

1.4 – Revolutionising Finance With Embedded Technology

Embedded finance is rapidly expanding worldwide, with neo-banking leading the way. Other sectors have begun to follow suit, such as vertical SaaS in areas such as insurance, health, investment, real estate, and travel. Companies specialising in integrated financial tools can therefore target a broad market beyond traditional credit structures or banks.

a – Embedded Payment: Payments Without the Need to Enter Payment Details

This is the most widespread and oldest form of integrated finance. Today, consumers can easily book a taxi or order a pizza via an app on their smartphone. Thanks to tools like Google Pay or Apple Pay, payment can be made in a few clicks and requires no banking information. Customers appreciate this technological simplicity and are more likely to re-use the service!

b – Embedded Insurance: Integrate Insurance Into Your Offer

E-commerce sites that sell consumer goods (electronics, household appliances, etc.) can integrate the subscription of insurance products into the purchasing process. This is also the case for online bookings of shows or events. Cancellation insurance is offered to customers without them having to commit separately to an insurance company or agent. These are concrete examples of how embedded insurance can improve the offer for the user of the platform or marketplace.

c – Embedded Banking: The Provision of Banking Services

Institutions that offer alternative credit to startups or independent workers can connect directly to their bank accounts and accounting through APIs. They then analyse this data to decide whether or not to grant a loan, within ultra-short deadlines. Similarly, some SaaS operate in this way to help entrepreneurs manage their cash flow or even establish financial forecasts.

Embedded banking involves integrating traditional banking tools such as debit cards and current accounts into non-financial platforms such as marketplaces or e-commerce sites. This system offers faster access to funds and other banking products that are only available to platform users.

d – Embedded Invoice Financing or Integrated Invoice Financing

Before embedded invoice financing, the user of an online platform who needed cash to make up for his cash deficit had to obtain a traditional loan from a financial institution. Embedded finance has changed the game by allowing FinTech companies to make financing more accessible, particularly for small businesses such as freelancers and SMEs.

Initially, BNPL (buy now, pay later) appeared in the B2C market, but it has since entered the B2B world with the ability to finance invoices on marketplaces, e-commerce sites, and SaaS platforms. Let's consider an example. In return for their services, a freelancer seeks instant payment. However, the platform has lengthy payment terms with its own clients, which makes it difficult for suppliers to get paid quickly.

FinTech companies like Aria now embed invoice financing directly into the portal's app. With just a few clicks, freelancers can obtain instant payment of their invoice, thanks to the integration of invoice financing into the platform.

2 – What Challenges Does Embedded Finance Address?

Embedded finance is a key factor in enhancing user experience on integrated platforms. In addition to providing financial services, it is also a powerful marketing and commercial tool.

2.1 – Enhance User Experience and Make Your Product Indispensable

Provide all essential services in one place, with just a few clicks to simplify and enhance your customer experience. A vertical SaaS or marketplace that offers an instant payment option in its product allows users to get paid instantly. This digital innovation sets businesses apart from the competition and attracts more customers.

2.2 – Improve Customer Loyalty

Happy customers come back for more. That's why embedded finance not only meets their needs, but also builds loyalty. In fact, retaining loyal customers is key to sustaining recurring revenue in digital businesses. By integrating financial services, you can boost gross merchandise volume (GMV) and connect small suppliers with big buyers in a marketplace. Plus, it significantly cuts churn rates. So, make sure to weave financial services into your marketing and financial strategies.

2.3 – Accelerate Company Growth

Integrating financial products boosts user experience, customer loyalty, and company growth. It streamlines conversion and the purchasing process, resulting in better financial performance. And with metrics like Gross Merchandise Value (GMV) and Long Time Value (total revenue from a customer's entire lifespan), you can easily see the ROI of embedded finance over time.

3 – Marketplaces, DSPs and Vertical SaaS: Which Departments Benefit From Embedded Finance?

Embedded finance not only improves the user experience for intermediation companies, vertical SaaS, or marketplaces, but also benefits managers of these companies in their daily tasks.

3.1 – Embedded Finance: A Simple Solution for Tech and Product Teams

CTOs know that unhappy users will eventually abandon their online products. But incorporating integrated financial services, like those offered by Aria, can solve this problem. User-friendly APIs can seamlessly integrate a white-label financing solution into your existing software stack. This allows SaaS or marketplace users to make instant payments with just one click, boosting customer satisfaction. Plus, Aria's well-designed, documented, and regularly updated tools make the integration process a breeze.

3.2 – Embedded Finance: A Selling Point for Revenue Teams

Digital businesses focus on revenue growth, so revenue teams see integrated financial services as crucial for attracting and retaining customers. By providing instant payments and favourable terms for buyers, Go-to-Market teams gain a competitive edge and instantly pay their suppliers.

3.3 – Embedded Finance: A Growth and Performance Tool for CFOs

Embedded finance is a game-changer for CFOs, Tech/Product, and Go-to-Market teams alike.

With a configurable tool, businesses can:

• Quickly analyse customer risk.
• Offer solutions for the platform users' treasury.
• Meet legal payment deadlines without disrupting working capital and cash flow.
• Boost revenue to improve company performance.

4 – Aria, the BNPL B2B Specialist That Embeds Financing in Your Apps

At Aria, we understand the importance of timely payments in facilitating business growth. Our instant invoice financing helps businesses of all sizes grow quickly and efficiently.

4.1 – Issues Faced by Our Clients Without Aria

Payment term regulations demand instant supplier payment, but DSPs and intermediary platforms struggle to attract freelancers and independent contractors. Larger companies take time to pay for services, creating a dilemma for these platforms.

Digital companies often lack the cash flow to cover working capital requirements. Bank loans and factoring are complex and inflexible, failing to offer tailored solutions like occasional cash advances or advances for specific invoices. Financing processes can be long and subject to prohibitive conditions.

4.2 – We Accelerate Your Growth by Integrating Invoice Financing Into Your Product

At Aria, we know smooth cash flow is key to business growth. That's why we offer integrated invoice financing for DSPs, vertical SaaS, and marketplaces. Our financial advances enable instant payment to service providers, accelerating digital company growth.

Our seamlessly integrated dashboard lets you:

• Easily manage credit lines.
• Get financing for 100% of invoices instead of the traditional 90%.
• Pay for each operation dynamically, not based on revenue.
• Enjoy a human and flexible collection process.

4.3 – Our Embedded Finance Solution Adapts to Your Billing Scheme

At Aria, we know every organisation has a unique billing scheme. Some marketplaces act only as intermediaries, while others manage all financial flows. That's why our embedded finance solution is flexible and adapts to each client's billing scheme.

a – How Aria Works for an Intermediary Who Receives a Commission

For DSPs or platforms that only issue a commission invoice to service providers, Aria allows for the advance payment of invoices to independent contractors who provide services.

By facilitating the transaction, we help to retain service providers for the intermediary company. They have the assurance of being paid instantly. In such cases, we proceed with an assignment of the invoice receivable issued by the service provider to the ordering company.

b – Aria’s Operation for Companies That Utilise Subcontractors

In this scenario, the company procures and resells services from subcontractors. Aria, in turn, provides upfront cash to swiftly compensate the service providers. We mitigate our risk by assigning the invoice to the end customer.

4.4 – Instant Invoice Financing Through API

Aria streamlines the process for your tech and product teams with our automatic API integration. Our invoice financing solution, integrated into your product, bypasses the classic difficulties often encountered by developers and product managers.

With Aria, you'll have access to:

• Clear, regularly updated API documentation online.
• Secure and modular APIs, based on the granularity of your offerings.
• Flexible authentication procedures, including Oauth2 or an API key.
• Webhook event notifications.

Embedded Invoice Financing and B2B BNPL: Discover Aria

Embedding financial services in DSPs, intermediation platforms, and vertical SaaS can boost their growth. Aria provides a simple and agile solution that allows these companies to finance their service providers' invoices. With the increasing demand for buy-now-pay-later options, Aria is a key player in meeting this challenge.