Precision banking is slated to be the future of financial services, according to McKinsey. The consultancy says in its annual ‘Global Banking Review’ that embedded finance is disrupting the traditional relationship banks have with customers, undoing loyalty and promoting faster mobile payments through third-parties, not financial institutions.
That may not be excellent news for traditional banks whose model is being eroded at every turn. But it represents a growing opportunity for companies agile enough to jump into the embedded finance space. Particularly those who can provide solutions that deliver greater value for strategic decision-making.
PwC says embedded finance could represent a sea change in the ways in which suppliers and their customers interact. It points to improved loyalty, more efficient customer journeys, data-driven insights and personalisation, and “frictionless, integrated experiences” that build stronger connections. All of these benefits will help business platforms create a richer, more valuable experience for their small- and medium-sized business (SMB) clients. That will also contribute to small business owners becoming more agile, strategic and financially aware on a day-to-day basis.
McKinsey estimates this growing part of the financial services industry will hit €100bn in value by 2030. That massive growth is not only driven by consumer solutions such as buy-now-pay-later (BNPL), but by B2B solutions like spend management tools. Those spend management tools might be expense tracking, corporate cards, invoicing or automated workflows.
A challenging economic landscape is making it harder for SMBs to focus on their customer relationships when their own finances are complex. The sprawling nature of business payments, accounts and receipts means that small business owners need to keep up with a vast array of information. All of which takes time, manpower and effort away from running the business.
“There is a lot of uncertainty in the market right now because of geopolitical reasons,” says Kunal Galav, vice-president of Pleo Embedded. “But the consistent theme is that, for SMBs in particular, their lives have become more complex because not only do they need to manage uncertainty in the macroeconomic climate, they also need to manage uncertainty around the financial lives of their businesses.”
The missing piece for SMB platforms
Most technology providers serving SMBs have a solid ambition at the heart of their business – to make their product indispensable to their customers. For many, that means developing tools that solve a unique challenge, whether that’s around workflows, customer experience or operations. But there’s one blind spot too many still overlook: finance.
Across Europe, SMBs continue to suffer from operational chaos and a lack of real-time financial visibility. Fragmented solutions, complex integrations and the grind of manual expense reconciliation have been identified as the biggest financial hurdles they face today.
Many SMB platform providers assume the world of finance sits outside their remit, yet the ability to embed financial capabilities – and become a core part of their customers’ business operations in the process – has never been more achievable.
Embedded finance solutions can consolidate SMBs’ finance and accounting streams while also providing real-time insights and analysis that will help inform their decision-making.
If the platforms SMBs rely on can equip business leaders with real-time visibility of their spending, all of their incoming finances and all of their financial obligations – without the need for a massive amount of spreadsheets or databases – SMBs can use those insights to make more informed, strategic decisions.
Traditional banks are not providing the insights and tools that SMBs need to operate in the modern economy
Moreover, instead of waiting until the end of the month to examine their monthly accounting, they can gain “intelligence at the point of spend,” says Galav. “That’s where embedded finance comes in.”
He adds: “In all of those financial journeys, if we are able to give small business leaders the visibility of the spend, they are able to automate the bookkeeping. And that is where we can add a lot of value to them.”
And it’s not as if this is a new concept. “The notion of embedded finance has always been there,” Galav says. “Where it’s becoming more and more relevant is that the boundaries are blurring between a good and a service. If you can combine and intertwine the flow of money, goods and services, it creates a phenomenal experience, makes things easy and enables SMBs to focus on what they’re good at doing, which is growing their business.”
That’s why Pleo has launched Pleo Embedded, an embedded finance tool designed to work within existing business service platforms and technologies. It combines intelligence and analysis from its business spending service into a brandable, embedded function that operates within the user interface of the existing platform.
Turning point solutions into indispensable hubs
Pleo works with partners across the business services landscape – including accounting firms, payment service providers, lenders and banks, and HR services – to help small businesses improve their spend management. Galav says: “Nobody has ever built a complete system for a small business to say, you can manage your contracts, you can manage your documents, you can manage your spend, you can manage your HR, you can manage your accounting. They’re all disbursed and distributed.”
Pleo Embedded works with the partners SMBs are already using to allow them to get on with business as usual, while drastically improving their spend management. It effectively acts as an extension of the branding, user interface and user experience of the business service platform, but enhances the financial oversight of the SMB in the process. It adds value for both the business leader who may be the end user and to the business platform that supports these SMBs.
The system allows partners to offer their SMB customers the likes of smart company cards, automated expenses, accounts payable and real-time cash management as a fully white-labelled or co-branded solution.
Boston Consulting Group (BCG) found that 64% of SMBs want their financial services to be embedded within a platform. Those platforms are already trusted partners operating at the heart of the business. Building spend management into them just makes sense. BCG says the addition of embedded finance into a platform could result in a 70% uplift in SMB revenue.
Pleo Embedded works by building into the platforms SMBs already commission and use. That means there’s no need for an added service – and cost – just an added benefit to an existing platform. “We believe the future belongs to business service providers that put customer needs at the heart of their offerings and Pleo is here to help build that future by making every spend decision a smart decision,” says Jeppe Rindom, Pleo’s CEO and co-founder.
SMB Group found that 87% of SMBs are already considering integrated financial software to help them manage their automation and digital operations needs. They cite cashflow visibility as well as monthly accounting as key motivations. This is propelling small businesses to take on a more medium-sized business mindset. As they learn the value of greater financial intelligence and spend management, they are demanding better from their accounting processes and systems.
More simply, Galav says: “It’s about the experience around it. How do you make it simple? How do you solve a genuine problem for a small business? Where can you help them succeed?” By creating a system that works within SMBs’ existing operations, tools such as Pleo Embedded can make a huge difference for business platforms and, in turn, for small businesses.
“Our mission statement is to make European businesses thrive,” says Galav. “And we do believe that if we bring spend management as a core capability to help us in this, they will gain intelligence at the point of spend, simplify things, democratise spend, and enable their finance teams to act as a strategic growth partner.”
Banking has become more democratised than ever before. Traditional banks are not providing the insights and tools that SMBs need to operate in the modern economy. SMBs rely on speed, knowledge and operational oversight to get things done – and to grow.
Gaining a better understanding of their finances is not only a good thing in terms of insights, but it also provides a means for businesses to make better long-term, strategic decisions based on actual, real-life data. This forecasting will help SMBs to improve their businesses, reach new customers and become more resilient amid the unpredictability of the global economic landscape.
For more information, please visit Pleo Embedded
Precision banking is slated to be the future of financial services, according to McKinsey. The consultancy says in its annual ‘Global Banking Review’ that embedded finance is disrupting the traditional relationship banks have with customers, undoing loyalty and promoting faster mobile payments through third-parties, not financial institutions.
That may not be excellent news for traditional banks whose model is being eroded at every turn. But it represents a growing opportunity for companies agile enough to jump into the embedded finance space. Particularly those who can provide solutions that deliver greater value for strategic decision-making.
PwC says embedded finance could represent a sea change in the ways in which suppliers and their customers interact. It points to improved loyalty, more efficient customer journeys, data-driven insights and personalisation, and “frictionless, integrated experiences” that build stronger connections. All of these benefits will help business platforms create a richer, more valuable experience for their small- and medium-sized business (SMB) clients. That will also contribute to small business owners becoming more agile, strategic and financially aware on a day-to-day basis.
