Optimizing product distribution is a critical factor in maintaining a competitive edge. B2B embedded finance is emerging as a transformative tool. It’s beginning to streamline distribution processes by making distribution more efficient and responsive to market dynamics. While embedded finance is often associated with consumer financial services, it is increasingly finding applications in the corporate sector. According to Bain and Company, financial services embedded into e-commerce and other software platforms accounted for USD 2.6 trillion, or nearly 5%, of total US financial transactions in 2021. By 2026, that number will exceed USD 7 trillion, and that will have a lot to do with B2B embedded finance catching up to consumer implementations.
No end to the use cases
Many use cases can be developed for embedded finance in distribution, we’re just starting to get a glimpse of how this new concept can be implemented. Here are five key things that companies need to keep top of mind to ensure their embedded finance project will be genuinely successful.
1. Streamline your payments and financing
One of the most significant advantages of embedded finance in product distribution is its ability to streamline payments and financing processes. Consider a scenario in which a manufacturing company relies on a network of suppliers to provide essential raw materials. That company can leverage an embedded finance solution offered to suppliers to expedite payments. With real-time payment processing, suppliers receive their dues immediately upon successful delivery. This not only enhances supplier relationships but also reduces payment-related disruptions in the supply chain.
2. Optimize your supply chain and inventory
Efficient inventory management and supply chain optimization are vital for companies involved in product distribution. Take, for example, a consumer beverage company that uses embedded finance to stay on top of inventory. By integrating real-time data analysis tools, that company can monitor product demand and inventory levels, predicting when certain products will be in high demand. This enables the company to avoid overstocking or understocking, ensuring products are available when needed, reducing costs, and minimizing waste.
3. Finance your distribution partners
For businesses that rely on distribution partners to reach a broader audience, embedded finance offers a unique advantage. Imagine a technology manufacturer that understands how critical its distribution partners are and creates an embedded finance solution to keep in constant communication with them. The company can use embedded finance to provide financing options, allowing distribution partners to purchase larger quantities of products upfront. This strategy not only enhances their partners’ cash flow but also accelerates the distribution process, expanding the company’s market reach.
4. Mitigate your risk to expand
Embedded finance empowers businesses to explore new markets and diversify their product offerings. Think of a massive pharmaceutical company. It can use embedded finance to offer credit and financing solutions to distributors looking to enter new markets or launch new drug products. This approach not only fosters expansion, it also mitigates risk by reducing dependence on a single market or product.
5. Gather valuable insights from your data
The real-time data insights provided by embedded finance solutions are invaluable for businesses aiming to optimize distribution. Let’s say you have an automotive manufacturer that relies on data insights to make informed decisions. By keeping in contact with distributors through an embedded finance solution, the manufacturer can access real-time data on sales, inventory levels, and partner transactions. When a certain vehicle model gains popularity, the company can quickly shift production and distribution strategies to meet demand, resulting in increased sales and customer satisfaction. Then, it can sift through that same data and correlate it with its marketing data to figure out why the car became so popular in the first place and how that success can be replicated.
The tip of the iceberg
These examples are really just the start. As businesses continue to adapt and innovate, digital corporate embedded finance is proving to be a game-changer for optimizing product distribution. By streamlining payments, enhancing inventory management, facilitating financing for distribution partners, enabling market expansion, and providing real-time data insights, businesses can navigate the complex distribution landscape with confidence.
By implementing embedded finance solutions, companies can distribute their products more efficiently, reduce costs, and improve overall distribution processes. As corporate finance evolves, those who successfully leverage embedded finance strategies will be at the forefront of enhancing their distribution networks and gaining a competitive edge in their respective industries.