The Power of Embedded Finance in B2B: Transforming Workforce Management and Boosting Business Efficiency

In today's fast-paced business landscape, the integration of financial products into non-financial consumer journeys has become the norm. We've all experienced the seamless convenience of Uber's in-app payments, a prime example of embedded finance in action. However, this potential extends far beyond consumer applications, as an increasing number of use cases in the business-to-business space demonstrate its value. By streamlining the user experience and reducing friction, embedded payments enable businesses to manage their finances more efficiently and receive payments faster. In fact, McKinsey forecasts that the embedded finance market will experience double-digit growth in the coming years , highlighting its growing importance in the B2B sector. Among the many compelling use cases for embedded finance is its ability to support businesses in addressing the challenges posed by the expanding contingent workforce. As the global contingent labour market is expected to reach a staggering $5.4 trillion in value , the need for efficient and reliable payment solutions becomes increasingly apparent. A significant number of freelancers – 74% – report being paid late, while 54% say they have not been paid at all on occasion . Our research at Sonovate reveals that 23% of businesses struggle to manage contingent worker invoices due to the additional administrative burden, and 38% admit that their cash flow is not equipped to handle such payments, which often fall outside of regular payroll cycles. These findings underscore the pressing need for businesses to adopt appropriate infrastructure to support the shift toward a post-pandemic work environment. Sonovate's impressive growth in 2022, with £1.1 billion in invoices funded, indicates that the demand for flexible, tech-powered B2B payment solutions is poised to create new revenue streams for fintechs and drive efficiency for businesses across various sectors. As the contingent workforce continues to grow (with 67% of businesses reporting an increased reliance on such workers), a change in mindset and processes is necessary to manage more frequent and flexible payments effectively. This shift makes it even more critical for businesses to have access to a fluid stream of capital. Fintech companies, recruitment agencies, and online labour markets can leverage embedded finance to adapt to the evolving work landscape by integrating technologies throughout the entire workforce supply chain – from recruiting and placing employees to processing payments. Embedded finance can become an integral component of a client's technology ecosystem, facilitating seamless financial management across the board. The advent of open finance and API connectivity enables organizations to access data securely and quickly, empowering them with the tools needed to make informed decisions. Client onboarding platforms like Sonovate's can incorporate Know Your Customer (KYC) and Anti-Money Laundering (AML) modules, resulting in a smoother customer experience from the outset. Moreover, these platforms can be connected to accountancy software to provide instant funding decisions, immediate allocations, and improved reconciliation and reporting. While B2B embedded finance offers a multitude of potential applications, its ability to revolutionize workforce management is particularly noteworthy. By ensuring contingent workers are paid on time, extending payment terms for employers, and enabling businesses of all sizes to grow confidently despite cash flow constraints or payroll limitations, embedded finance is poised to transform the B2B landscape and propel businesses into a new era of efficiency and growth. Read more articles like this in The Financial Technologist. Download your free copy here.