As businesses of all sizes across a multitude of verticals seek more efficient ways to manage payments and working capital, embedded finance is emerging as a transformative force in B2B commerce.

That’s the view of Alan Koenigsberg, senior vice president and global head of large, middle market, industry verticals and working capital solutions at Visa, who told Karen Webster that consumer-like experiences online will help bring analog B2B interactions fully into the digital realm.

Koenigsberg — interviewed for PYMNTS’ “What’s Next in Payments” series — emphasized that while embedded finance has been a staple in consumer eCommerce for years, its application in the B2B space is gaining momentum. However, there will not necessarily be a hockey stick adoption curve.

“We’re likely to see larger firms take up the embedded finance mantle, and smaller enterprises will follow suit,” he said.

In the meantime, he said he believes the adoption of certain back-office technologies such as treasury workstations and enterprise resource planning (ERP) systems will present treasurers with data to help them see additional working capital benefits by “doing something different — and then you’ve added value. That’s a big part of what Visa does.”

The Importance of Scale

Koenigsberg highlighted the role of scale in driving the adoption of embedded finance across the financial supply chain. He emphasized that while technology is essential, the real challenge lies in achieving scalable solutions that can meet the diverse needs of various stakeholders.

“The field is littered with non-scale solutions built in a way that was not for that customer,” he said.

He explained that scalable embedded finance solutions must adapt to the specific needs of businesses, particularly in the B2B sector. This approach ensures that financial products can seamlessly integrate into existing workflows, thereby reducing friction and enhancing user experience.

One of the key innovations Visa has focused on is the reassembly of financial products through partnerships, such as with SAP’s Taulia. The partnership brings together Visa’s digital payments technology and Taulia virtual cards, a solution that integrates with SAP’s ERP offerings and business applications.

The importance of scale is also evident in the broader context of working capital management. Koenigsberg pointed out that effective working capital solutions can enhance the financial efficiency of businesses, especially in a fluctuating economic environment marked by rising interest rates and changing market dynamics.

The Working Capital Framework

Central to the discussion of innovations in embedded finance is the concept of working capital management. The recent period of rising interest rates has brought renewed focus to accounts receivable processes, after a decade of developments primarily centered on accounts payable and buyer-led solutions.

“It does feel like a little bit of the ‘Back to the Future’ kind of comment,” Koenigsberg said, noting the shift in focus. However, he stressed that the goal remains to make transactions easier for both buyers and sellers, regardless of their size or relative market power.

Visa’s role in this evolving landscape is as a connector of commerce, according to Koenigsberg. He said the company aims to facilitate connections between financial institutions and between different elements of the financial value chain on a global scale. This position allows Visa to adapt solutions from one market to another, sharing information and making innovations more widely applicable.

Koenigsberg highlighted the importance of industry specialization in developing effective embedded finance solutions.

“The winners here will be industry specialists,” he predicted, pointing to sectors like aerospace and fleet as areas where deep industry knowledge will be crucial for building trust and creating tailored solutions.

The transformation of various verticals has been pushed toward a “tipping point” as younger generations, particularly Generation Z consumers, become more prevalent in the workforce, Koenigsberg said. He suggested that younger professionals entering the business world are questioning why their work experiences don’t match the digital experiences they’re accustomed to in their personal lives.

Technology Challenges

The push for embedded finance in B2B is not without challenges. Koenigsberg acknowledged that while the technology piece can be daunting at first, it’s often the easiest part of the equation. The bigger challenge is changing established processes and overcoming organizational inertia.

To address these challenges, Koenigsberg stressed the importance of making solutions “out-of-the-box ready” for corporate customers.

Looking ahead, Koenigsberg said he sees 2024 as a pivotal year for embedded finance in B2B commerce. With many of the technological pieces now in place and a growing demand for more efficient processes, the time has come for action.

“As we go through the midpoint of this year, it’s time for execution,” he said. “It’s time to go live.”

He emphasized the need for companies to spend more time listening to customers as they build and adapt their solutions, ensuring they’re easy to implement and truly meet business needs.