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The world’s economy is unquestionably going through a challenging period. Across the globe, inflation is rising and energy prices are contributing to a cost-of-living crisis for many different countries.
This is understandably troubling for businesses. They are tackling financial woes on two fronts: firstly, customers and potential customers will be more inclined to save as general costs become higher, and secondly, investors are more likely to wait out this turbulence than invest in new businesses.
Therefore, all businesses will be looking for ways to reduce costs or boost revenue or, ideally, both - 74% of recently surveyed CFOs ranked profitability as their primary concern. Instead of focusing on one approach, better financial technology gives businesses the opportunity to target both at the same time.
Through embedding financial services, businesses can automate a lot of their operations without the requirement of building any financial infrastructure or going through the same stringent regulatory processes themselves.
Below we examine various ways in which it can both reduce costs and boost revenue.
Through embedding and owning financial services, businesses have more control. One of the main advantages of this control is cutting unnecessary costs.
Let’s look at the example of a B2B SME. Many different companies use this business and there are therefore a high number of invoices being sent out, often representing different values. But when it comes to actually getting paid, what does the process look like?
The SME is likely to be partnered with a payment provider which will accept payments in a particular way, with payments being processed in a particular time frame, from particular geographical locations.
When invoices are paid, those funds then need to be reconciled manually. Finance and ops teams need to go through payments of various amounts from various parties to ensure that the books are balanced correctly. Incorrect references can cause delays and payments will often have to be chased.
In certain cases, the SME’s accountant will need to enter all values received into their own finance and accounting system, something that takes painstaking hours and is susceptible to human error. Instead of SMEs concentrating on growing the business, they are spending their time on these tasks.
But businesses are able to use a completely different approach - automation. A modern, tech-driven payment infrastructure enables all payments to be reconciled automatically and instantly displayed on a dashboard. Let’s examine how the process looks for the SME using an automated approach.
Invoices are sent out with a payment link embedded within the invoice. This substantially accelerates the speed in which the business is paid and therefore cash flow issues are reduced, with less time spent chasing payments.
Those payments are then instantly reconciled within that same software. No more hours of entering values with data always at risk of human error. However fast the SME grows, the automated solution handles the finances, substantially easing the workload of business owners and alleviating the need of hiring new accounting staff.
But furthermore, a sophisticated payment framework can reduce the number of partnerships that SMEs require to operate (with each potentially altering their prices over time), instead keeping all services in one place.
If you are a travel business, instead of using one payment gateway, one FX service, one accountancy service and one insurance firm, everything can be embedded into your own product ecosystem by a single embedded finance provider.
While this can cause a reduction in costs in the immediate term, over time the added efficiency will cause costs to go down further still.
On the other hand, a modern payment infrastructure can also be utilised to gain additional revenue. Through embedding financial services you are able to offer more. Exactly what you choose to offer is completely down to what works for your business.
One example would be expanding overseas. In order to do that, you need the ability to accept payments from that region and to have met the correct regulatory standards. With embedded finance, you can instantly connect to a framework which accepts payments from all over the world and gives you FX at the wholesale rate.
The capacity your business has to target new customers has now grown dramatically without going through the rigmarole of becoming licensed in another jurisdiction.
Another example would be embedding the ability to accept card payments. Currently, the vast majority of B2B payments are done via manual bank transfer, despite the fact that many businesses have corporate cards that they are incentivised to use.
By accepting card payments, your business can attract a higher number of customers while offering the exact same service, boosting revenue.
These are just two examples, but all financial services can be embedded via an API connection. There are countless ways to add revenue streams to your business.
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We shouldn’t negate or undersell the concerns that many businesses rightfully have in these uncertain times. However, this is also an opportunity. Taking an automated, embedded approach to financial services gives businesses across many different sectors a way to keep funds coming in while operating as efficiently as possible.
Innovative SMEs deserve an online payment infrastructure which encourages and stimulates their growth. UNIPaaS was created for that reason. If you’re interested in learning more, don’t hesitate to get in touch today.
UNIPaaS Financial Services Limited is regulated by the Financial Conduct Authority (FCA) as an Authorised Payment Institution (No. 929994). UNIPaaS is certified as PCI DSS service provider Level 1.
