Payments Experts Say Embedded Finance Still in Early Innings
Say the term “embedded payments,” and thoughts typically wander to the consumer side of commerce to such things as the invisible transactions in the background of an Uber ride or the one-click retail checkout on a phone.
But as Galileo CPO David Feuer, Entrata CFO Mark Hansen, and Global Rewards CEO Isaac Itzkowitz noted during a recent On the Agenda roundtable, we’re seeing a major surge of embedded payments in the commercial realm too.
“It’s early innings in this digital transformation,” Hansen said. Right now, the modernization of B2B payments takes a cue from the Apple Pays and the Google Pays and through any number of apps. That’s a goal, perhaps, where we’re used to seeing our banking and transaction information at the ready, and on demand.
But getting there will entail upgrading a broad range of back office functions, such as AP automation, which will translate into more vendors getting paid through digital means, rather than accepting that old staple: the paper check.
It’ll take time to move beyond the early innings, to see the rising use cases for B2B embedded payments to truly reach their true potential.
Feuer pointed to the fact that it took a full decade for consumer credit cards — first introduced in the late 1950s — to catch on.
“What’s happening now,” said Feuer, “is that with APIs and the Internet and the pervasiveness of connectivity, we’re starting to see the next generation of finance... happen at ‘Internet’ speed.”
The greenfield opportunity is there, noted the panelists. The present B2B experience is dominated by a “swivel chair” existence that requires pivoting between any number of screens, software programs and ERP systems (not to mention e-mails and even faxes) to get things done. Make a mistake — and, of course, with manual tasks mistakes do get made — and things get expensive.
No surprise: The bottom line is in ever-sharper focus, especially now with a volatile economic backdrop. As Itzkowitz said, “when times get tough, people look at their bottom lines.” In doing so, they target new efficiencies and focus on automation to get there. Platforms, the trio of executives told PYMNTS, are essential in streamlining integrations and embedding solutions into customer relationship management software so enterprises can focus on their core operations.
Entrata’s Hansen, whose firm makes multi-property management software, and whose open platform has a B2B2C component, said that the embedded finance opportunity is governed by the principle of not having to go through the full, manual, procure-to-pay process. Automating payments, cutting out the paper and avoiding a trip to the bank are worthy pursuits. COVID-19 has been a meaningful accelerant to that digital shift, since it meant going to the property management office or the bank simply wasn’t an option.
Global Rewards, an all inclusive corporate spend solution platform, said Itzkowitz, is seeing a “tremendous uptick” in the demand for API and for automation, and an accelerating pivot towards taking and receiving card payments rather than checking or ACH.
“Having the ability to do things with your technology, within software, so that you’re doing all of your accounting…and to make payments in the formats in which you want to make them, that’s where people are heading,” said Itzkowitz.
The Technical Discussion
There’s some hesitation on the part of some companies to fully commit to embedded payments over security fears, the executives noted. Hansen pointed out that there’s extra layers of security tied to virtual card issuance (the cards can be used only once) and added that the card networks have gotten more sophisticated in detecting fraud and alerting businesses of various attacks and scams.
“There’s always skepticism when it comes to a new product,” Itzkowitz said, especially when a business has been running a certain way for a long time. “But you have to evolve with the times.”
In bringing some level of consumerization to B2B payments, it’s critical, from a technical perspective, to make sure that the software understands the needs of the user. Providers and partners need to make sure they help enterprises get the most agility and value out of their tech stacks.
Readying for Real Time
Feuer said that B2B payments are poised for a next leg of evolution, especially as the industry gets closer to real-time payments as FedNow launches next year. Open banking and the emergence of various regulatory schemes around the globe are paving the way for real-time payments to become the de-facto enterprise expectation in the near future.
“It will take the participation of the ecosystem,” Feuer added, including Global Rewards, Entrata and Galileo, and a host of others “to become part of a real-time payments network and settlement system.”
Looking ahead, as more companies seek to solve pain points for corporates’ needs, Itzkowitz said that we’re headed toward an embedded, API-connected B2B landscape where CFOs are able to see their money, their spend, and their reporting all in one bundle, connected to their ERP systems.
As Feuer said, “the consumer experience has defined a mobile, social, local and hyper-personalized experiences — and now B2B enterprises expect the same sorts of experiences.”