Embedded finance is the magic potion for customer retention. Here’s why.

Shamolie Oberoi   /    Content Marketing Specialist    /    2022-03-16


Thriving B2B marketplaces hit a wall when it comes to differentiating on value. They have tried to address this by attracting new customers with added verticalization or new functionalities. However, in the last decade, several B2B marketplaces have hit critical mass, their network effects are now commoditized. As a result, captive businesses have little or no incentive to stay loyal to a particular marketplace.

Take for example, Shopify and Magento. Both help businesses set up digital storefronts. Each one has an extensive set of themes to choose from. Both offer basic store functionalities that are powerful to use and easy to maintain on an ongoing basis. Both offer customization capabilities.

Why should a merchant choose one over another?

The game henceforth would be owning and orchestrating the customer value chain.

This is where Embedded finance offers a breakthrough. It helps B2B marketplaces with a first-mover advantage in going beyond transactions, evolving further than channels of discovery to owning the entire user journey, end to end.

Without having users to jump across interfaces, embedded finance ensures delivery of in-app finance options, right at the point of need. It disincentivizes users from switching to other networks, while building on deep data relationships for curated financial products.

It does this through a partnership driven ecosystem that goes a step beyond simply offering digital credit. Instead, it’s characterized by: - Sachetized, in-context credit products 

- Distribution at scale

- A captive user base found on platforms and apps

Addressing every need through a single platform, the marketplace engages its users more deeply. Embedded finance opens up possibilities to build on the ‘embedded’ moat with embedded procurement, logistics and support. This leads to user stickiness. 

This blog explores the roadmap to build user stickiness for B2B marketplaces in further detail.

Five ways embedded finance can create user stickiness for B2B marketplaces:

Create value with relevant offerings

Embedded Finance allows marketplaces, as the name suggests, to embed financial products at the point of sale so buyers checkout seamlessly. Do they need a payment plan to purchase items in bulk? Or say, appliance insurance in case of damage to their purchases? Marketplaces that deliver these products to customers right when needed will create market differentiation and firmly position as top-of-the-mind brands for their customers.

That’s part of the reason why Shopify is the first choice for smaller merchants. Shiopify identifies business needs that aren't being met (such as small-ticket credit), and then builds in products - in this case, Shopify Pay - within the user journey accordingly. The checkout button for Shopify’s online stores offers customers an accelerated experience by allowing them to save their card information and other data. This comes as part of an already packed FinTech stack that includes Shopify Capital, Shop Pay Installments, and Shopify Balance - all geared towards boosting merchants’ businesses and improving purchase experiences.

Know your customers, more intimately

Embedded finance allows marketplaces to foster more meaningful relationships with their customers based on deep data. As a marketplace that knows its merchants and understands their needs, it enables cross-selling and upselling of relevant, personalized products that meet unique requirements. Take for example, Amazon, that offers a business line of credit, ideal for businesses that have been making regular purchases on the site. This gives Amazon reams of data that it can use to underwrite customized, flexible credit.

Simplify experiences to build trust

B2C purchases are often impulsive and don’t have much thought behind them. On the other hand,  B2B sales cycles are longer, involve multiple phases and stakeholders, and are of a higher value. Trust is a major factor here - but once it is gained, the marketplace can count on repeated orders from the same client (did you know the average B2B company generates up to 30% of its total revenue from existing customers?)

The key to building this trust? Keeping it simple. Don’t underestimate just how much Embedded Finance can simplify the purchase experience for your customers. Credit at the point of sale removes the need to visit a third-party app for payment, and automated underwriting brings waiting time down to just a few seconds. What’s more, this entire process can be done by the user on their own without assistance from customer service agents.

Enabling a smooth checkout experience shows users that you care about how they’re engaging with your platform and that you want them to come back.

Gain more negotiating power

Embedded finance creates customer trust and confidence in the marketplace, leading to more businesses coming onboard. The demand-side pull leads to traction on the supply side, leading to exponential growth in the number of players on both sides. The marketplace is then uniquely positioned to negotiate prices and best deals for transacting businesses, given the critical mass it just achieved. The thriving network of suppliers and demand-side groups will encourage competitive pricing for all stakeholders on the platform - including the end customer, creating further lock-in value.

Build adjacent capabilities

Embedded finance helps marketplaces see gaps in customer journeys that can be addressed by plugging in adjacent capabilities. The marketplace can natively offer accounting and book-keeping or a basic CRM to help businesses expand without running additional overhead costs (like procuring separate software) etc. 

For example, Shopify Pay - also known as Shop Pay - includes shopping recommendation and local Shop searching with in-store pickup and delivery features.

If a B2B buyer gets everything from the same platform - it disincentivizes the need to switch over to another marketplace that does not offer as many functionalities.

Real value lies in depth, not breadth

It’s no longer enough to offer a wide variety of products through your marketplace. It’s time to focus on whether the sales match the ambitions. If not, platforms must think about how to best address roadblocks that can affect transactions.

That’s what’ll keep your users coming back. Do they have to go through several steps to pay for their purchase? How long does it take? Do they have to navigate to a third party site?

Focus on their convenience and minimize their effort with Embedded Finance, and unearth new network effects that keep the marketplace flywheel running.