Cultivating a solid merchant network through embedded finance

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The idea of a merchant network has gone beyond the traditional transactional paradigm. The concept is swiftly becoming a game-changer for large corporations. As an interconnected ecosystem of businesses, suppliers, stakeholders, and distributors, a merchant network can foster collaboration and ultimately retention and exclusivity through the use of embedded financial services such as those offered by platforms like Toqio.

The fundamental role of embedded finance in developing a healthy business ecosystem can’t be overstated. Leveraging embedded finance isn’t just about integrating financial services, it’s more about transforming the way businesses interact, transact, and collaborate so that everyone derives benefit.

Understanding merchant networks

Historically, a merchant network was characterized by manual communications and slow transaction processes. Nowadays, a merchant network is based on four main elements: strong collaboration, efficient transactions, accessibility, and inclusivity. Networks are also fuelled by easy access to data which is crucial for long-term success. Each player in the ecosystem affects and is affected by each other which encourages mutual growth and adaptation. This symbiotic relationship serves as a basis for businesses to innovate and expand. Efficiency, agility, and data-driven insights are essential elements for sustained growth and a competitive edge in the marketplace.

How embedded finance is changing everything

Embedded finance is currently reshaping traditional banking landscapes by integrating financial services into non-financial platforms. It offers a variety of tools that can help small businesses grow and large businesses create a dependable and nigh unbreakable supply chain, including core banking functions, insurance, investments, and financing that are hyper-personalized for each participating small or medium enterprise (SME). Also, sophisticated data analytics tools allow both sides to review and learn from the vast amounts of information that flow between them, leading to clearer insights and better decision-making. Overall, the power of embedded finance is that it can unlock a myriad of new opportunities for collaboration and growth.

Five ways embedded finance can help consolidate merchant networks

1. Simplified transactions

Embedded finance improves transaction processes throughout merchant networks, making them quicker, safer, and less demanding. The integration of application programming interfaces (APIs) facilitates real-time payment processing. Automated invoicing systems, where efficiency can be further enhanced by AI, reduce manual input and accelerate payment cycles. Higher efficiency boosts performance and promotes smoother collaboration and communication among network members.

2. Easier access to financing

One of embedded finance's main advantages is its ability to improve financial accessibility, especially for SMEs in merchant networks. It provides small businesses with working capital and supply chain financing. This, in turn, facilitates effective cash flow management and the exploration of growth opportunities. Such increased financial access creates a much more resilient network ecosystem that practically eliminates supply chain disruption due to SME cash flow issues. Embedded finance can ease the top difficulties reported by the vast majority of SMEs that regularly deal with large corporations, which are:

  • Lengthy payment approval cycles
  • A lack of banking providers that can accurately gauge risk
  • Rigid payment systems that push for 90-day or longer payment terms

3. Improved data insights

Embedded finance platforms provide invaluable data analytics tools. Toqio, for example, offers businesses insights into transaction patterns, customer behaviour, and financial performance. These insights help companies make more strategic decisions and manage risk better. In addition, large companies can help SMEs in their networks identify opportunities for optimization and innovation, helping everyone involved to improve and grow continuously.

4. Collaborative innovation

The use of embedded finance creates a culture of innovation and collaboration within merchant networks. Embedded finance promotes partnerships and the development of new business models by facilitating financial transactions and offering a wide range of customizable financial services. Collaborative efforts between network participants and fintech providers encourage innovation which often results in vastly improved customer experiences.

5. Enhanced scalability and flexibility

Embedded finance boosts both the adaptability and versatility of merchant networks. It also provides the tools necessary to grow businesses and to ensure that companies can navigate changes in the market and take advantage of growth opportunities. Hence, as a network of merchants grows, financial systems are prepared to support a larger number of transactions and adjust to increasingly complex needs while maintaining efficient and secure operations.

The future of embedded finance in merchant networks

Looking ahead, the corporate embedded finance sector is expected to grow exponentially, reaching USD 7.2 trillion globally by 20301. This growth reflects an increase in the integration of finance into everyday business platforms which will make transactions smoother and more accessible. Thanks to this evolution, customers, SMEs and merchant networks will benefit from more tailored financial services and richer data insights. Overall, corporate embedded finance is set to shape a future where targetted financial tools will support ever more complex merchant networks and equip them to navigate intricate business challenges.

1 Embedded finance: unlocking a billion dollar sector, Fintech Magazine

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