Small Business Eager to Tap $51 Billion Embedded Finance Market

Small to midsized businesses (SMBs) often face a legion of challenges when attempting to process payments swiftly and securely. Incorrect invoices, insufficient cash reserves and late payments from customers or to vendors are just some of the obstacles SMBs tackle on a regular basis. Nearly one-third of organizations said they are often unable to pay vendors due to accounts payable (AP) or accounts receivable (AR) difficulties, and 60% of business owners worry about cash flows on a monthly basis as a result of these accounting problems.

Late payments to vendors or from customers can have massive downstream ramifications, ranging from accounting headaches to delayed or missing payroll. Fixing these late payment headaches are often an insurmountable obstacle for SMBs that lack the resources or know-how to upgrade their payments systems to a more timely alternative.

This edition of the “Embedded Finance Tracker®” examines the latest developments in the embedded finance field and how this technology can help SMBs make more timely payments, improve inefficient AP processes and have more capital on hand with which to hire new employees.

Around the Embedded Finance Space

Instant payments, eMoney, digital wallets and other emerging payment methods are quickly becoming the way of the future, with a recent study finding that these methods are expected to comprise 26% of all non-cash transactions by 2026. They represented 21% of non-cash transactions as of last year. Many merchants are struggling to keep up with the influx of new methods and are turning to alternative banking to meet the demand.

A recent survey found that 57% of Canadian SMBs faced cash flow issues, a jump from 41% that said the same before the pandemic. One in 10 said it was their most formidable business obstacle, and another third said they had trouble accessing critical financial products and services thanks to these cash flow troubles.

For more on these and other stories, visit the Tracker’s News and Trends section.

Leveraging Embedded Finance to Fuel Small Business Ambitions

Efficiency is the name of the game when it comes to digital payments. Merchants expect digital payments from their customers to be processed swiftly and seamlessly and to have the money in their accounts without any complications on the front or back end. Embedded finance solutions are critical for small businesses to enable this functionality, particularly those run by disadvantaged individuals.

In this month’s Insider POV, PYMNTS talked with Sofiat Abdulrazaaq, CEO of on-demand food truck marketplace Goodfynd, about how embedded finance can help merchants address the most common payments complications.

Why Embedded Finance Could Be the Silver Bullet for SMBs

SMBs face significant obstacles when it comes to payments friction. These payment complications can take many forms, with 45% of SMBs reporting that manual reviews are a top challenge, 43% complaining about the high costs of making payments, 41% reporting time-consuming payments processes and 35% lacking financing options. Reducing these challenges requires choosing the right financial partners, and for many of these SMBs, traditional players in the banking industry are not meeting expectations.

This month’s PYMNTS Intelligence examines how embedded finance solutions can help SMBs ease these frictions.

About the Tracker

The “Embedded Finance Tracker®,” a collaboration with Galileo, examines the latest developments in the embedded finance field and how this technology can help SMBs make more timely payments, improve inefficient AP processes and have more capital on hand with which to hire new employees.