The economy has evolved fast – thanks to online marketplaces. By revolutionising the way businesses interact, they have set the stage for substantial growth: by 2024, global B2B marketplace sales will soar to $3.6 trillion, up from just $680 billion in 2018.
Online marketplaces account for a significant 62 percent of total e-commerce spending. As businesses increasingly embrace adaptable and dynamic retail approaches across multiple channels, service models are also evolving.
One of the most significant drivers for growth and seller retention in the competitive marketplace landscape is embedded finance.
What difference do embedded finance solutions make?
Embedded finance solutions are proving to be essential to marketplaces which compete to offer the most exceptional seller experience. According to Bain, embedded finance solutions for various software platforms, including marketplaces, are anticipated to surpass $7 trillion by 2026. This figure includes embedded lending, projected to reach between $80 billion and $90 billion.
Top-tier marketplaces have successfully harnessed the power of embedded finance to stand out in the crowd, offering their sellers fast and convenient access to business-specific financial products, as well as benefiting the seller with revenue growth and customer retention.
Which embedded finance solutions are good tools for businesses?
Looking at the growth trajectory of embedded finance solutions should inspire business marketplaces to give easy finance options to their sellers as well. These options should include term loans, revolving credit facilities, and merchant cash advances. The ideal solutions will depend on many factors, such as the nature of customers, technical capabilities of the platform and the integration strategy for lending within the business model. In all cases, the solution must align with merchants’ needs if it is going to drive meaningful adoption and value.
Questions to ask:
- Can the embedded finance solution meet the needs of customers in this sector?
- Is the embedded finance solution FCA-certified, secure and legitimate?
- Is the experience frictionless and straightforward for the end user and merchant?
How can embedded finance solutions drive growth and seller retention?
There are three ways that embedded finance solutions can help your marketplace thrive by growing the existing business and making it a more attractive place for sellers to do business.
Reduce Cash Flow Uncertainty:
- Embedded finance solutions often provide quick and easy access to working capital for sellers. They can secure loans or lines of credit based on their sales history and performance within the platform. This access to capital helps sellers manage their day-to-day operations, purchase inventory, and cover unexpected expenses, reducing cash flow uncertainty.
- Embedded finance solutions can enable faster payment processing and settlements, reducing the time sellers have to wait for their funds. This acceleration in cash flow can be critical for smaller sellers with tight margins, helping them meet their financial obligations and invest in growth opportunities more confidently.
- Some embedded finance solutions offer tools for risk assessment and fraud detection, which can help sellers reduce losses due to chargebacks and fraudulent transactions. By mitigating these risks, sellers can maintain more stable cash flows.
Increase Ability for Sellers to Increase Stock Inventory
- Sellers can use supplier finance meaning they can spread the cost of stock, allowing them to make larger stock purchases and meet the needs of their customers. This has the effect of increasing the ability for a seller to buy larger quantities of stock and increase their stock inventory.
Increase Seller Loyalty:
- Platforms can reduce churn by offering their merchants services within the platform that help them run their online store. Having all funding options available in one place, on the platform where they manage their online store, the seller spends more time on the platform and sees the value of the platform’s services for a merchant.
- Increase loyalty by equipping the merchants with the tools needed to be able to hold more and diversified stock.
Embracing embedded finance for marketplace success
In an increasingly competitive business landscape, embedded finance solutions hold immense potential for helping sellers sell more, producing higher sales, higher revenues and stickier sellers. Collaborating with experienced partners like Swoop empowers businesses to expedite processes, customise customer experiences, and mitigate risks.
As the online market continues to grow, embedded finance emerges as a powerful tool to shape the future of commerce.
To explore embedded funding solutions, speak to Swoop’s partnership team by booking a meeting.