The financial world is abuzz with the term “Embedded Finance.” It’s a concept that’s dominating conferences and discussions among experts. Financial companies, both traditional and alternative, are waking up to the vast potential of transactional financing – the financing of purchases, sales, and commercial agreements. This space is ripe for intermediation and new business opportunities, with trillions of dollars waiting to be tapped.
In simple terms, Embedded Finance is about making financing an integral part of transactions. One aspect of this is the “Buy Now, Pay Later” (BNPL) trend. BNPL allows consumers to delay payments or split them into installments without extra costs. This has been a hit in the business-to-consumer (B2C) segment. Consumers love it because it lets them buy now and pay later. Sellers benefit from increased sales.
Data from major B2C players in Spain and Europe shows that BNPL can boost sales conversion rates by around 20%. It can even nearly double the average transaction value. When consumers can split or delay payments, they’re more likely to make a purchase. For example, if a customer can buy a €600 bike and pay €200 monthly for three months without interest, they’re more likely to make the purchase.
The B2B segment, however, is a different story. BNPL is still in its infancy, especially in southern Europe and Spain. Some northern European countries have seen the emergence of B2B BNPL startups, which are gaining traction. For businesses, BNPL can be a game-changer. Imagine a company needing to replace 10 computers for €10,000. If they can pay €3,333.33 monthly for three months without interest, it’s a no-brainer. This financing option helps businesses manage their cash flow.
One key difference between B2C and B2B is how transactions are made. B2C transactions are mostly online, while B2B transactions often happen offline – in stores, over the phone, or via email. Offline transactions usually have limited credit options and often require costly insurance policies. BNPL solutions for B2B need to cater to both online and offline transactions.
Spanish SMEs are increasingly adopting digital solutions, including API integrations that enable automated information exchange. This trend is crucial for BNPL adoption in B2B. Even businesses without online stores can connect to BNPL platforms like MytripleA, offering instant financing to buyers. The electronic invoice is also set to drive automation in this space.
Transactional Financing is Here to Stay
Transactional financing, including BNPL, is becoming a significant market, surpassing traditional balance sheet financing. BNPL is already popular in B2C and is poised to make a big impact in B2B. MytripleA has launched Spain’s first 100% homegrown B2B BNPL platform, aiming to be a leader in southern Europe. The platform offers complementary products like factoring, confirming, and loans to support businesses.