Embedded finance is becoming a disruptive force across various industries, changing the way businesses offer financial services and transforming customer experiences. For commercial finance brokers, understanding who the major players are in the embedded finance space is crucial to recognizing both the opportunities and the threats that come with this shift.
Several key providers, including FundThrough, Balance, Resolve, and Parafin, are moving quickly to capture market share by integrating finance solutions directly into B2B platforms, marketplaces, and e-commerce systems. In this article, we’ll profile these companies, explain their strategies, and explore how brokers can either capitalize on the trend or navigate around potential challenges.
- FundThrough
FundThrough is a leading player in the embedded finance space, primarily focused on providing invoice financing through digital platforms. By integrating its financial solutions into platforms that cater to small and medium-sized businesses (SMBs), FundThrough allows these businesses to access working capital quickly, often at the point of sale.
Opportunity for Brokers:
FundThrough’s model offers brokers a chance to partner with platforms that need a financing solution for their clients. By connecting their clients to FundThrough’s fast, digital financing options, brokers can expand their offerings to include invoice financing without having to build out the infrastructure themselves.
Threat to Brokers:
FundThrough’s embedded finance solutions bypass traditional intermediaries like brokers, potentially cutting them out of deals. If clients can access funding directly through platforms with no need for a middleman, brokers may see reduced demand for their services, especially in the SMB market.
- Balance
Balance is another major provider, offering B2B payment solutions that allow companies to offer flexible payment terms at checkout. Integrated into e-commerce platforms and marketplaces, Balance provides an embedded financing option for businesses looking to offer net terms to their customers.
Opportunity for Brokers:
For brokers, Balance represents an opportunity to collaborate with platforms in the B2B space. By connecting with Balance and its ecosystem of e-commerce platforms, brokers can align themselves with businesses that need financing solutions, such as offering complementary long-term financing to buyers who utilize Balance’s short-term credit.
Threat to Brokers:
As more B2B platforms adopt embedded finance solutions like Balance, brokers could face disintermediation. If a client can access flexible payment terms and financing directly at checkout, they may be less likely to seek out a broker for alternative financing options.
- Resolve
Resolve focuses on providing net terms and embedded invoicing solutions to businesses, allowing merchants to offer extended payment terms to their buyers without taking on the credit risk. Embedded directly into invoicing platforms, Resolve helps SMBs secure financing while managing their cash flow more effectively.
Opportunity for Brokers:
For brokers specializing in commercial financing, Resolve can be a useful partner. By working with platforms that embed Resolve’s solutions, brokers can help clients manage cash flow and provide additional services around larger, long-term financing needs that complement net terms solutions.
Threat to Brokers:
Similar to other embedded finance providers, Resolve removes the need for a middleman in certain financing situations. If clients are happy with the net terms offered through platforms integrated with Resolve, they may not need to seek out brokers for financing advice or services.
- Parafin
Parafin offers embedded financing to SMBs by partnering with marketplaces and digital platforms to provide capital to small businesses based on their sales data. Parafin’s embedded lending model allows businesses to access capital quickly, often through a fully automated process integrated directly into a platform.
Opportunity for Brokers:
Parafin’s lending solutions could be a complementary service for brokers who deal with SMBs needing immediate access to capital. By partnering with Parafin, brokers could integrate their services into these digital platforms and offer additional financial products, such as longer-term loans or equipment financing.
Threat to Brokers:
The automation and direct platform integration that Parafin provides could mean that SMBs no longer need to work with brokers to secure capital. As embedded lending options become more common, the demand for broker-driven financing for smaller deals may shrink, particularly for businesses that prefer the speed and simplicity of an embedded finance solution.
- Other Notable Players: Stripe, Shopify Capital, and Square
Beyond these niche providers, large fintech companies like Stripe, Shopify, and Square are also expanding their embedded finance offerings. Stripe Capital, for example, provides financing directly to businesses using the Stripe platform, while Shopify Capital and Square Capital offer loans to their merchant users based on transaction histories.
Opportunity for Brokers:
Partnering with these larger platforms, brokers can offer specialized financial services that go beyond the short-term working capital loans these platforms provide. For example, brokers might focus on asset-backed lending, larger equipment financing, or term loans that require more customization.
Threat to Brokers:
However, the threat is clear: as fintech giants like Stripe and Shopify deepen their embedded finance capabilities, they reduce the need for businesses to seek external financing. With easy access to working capital directly through these platforms, brokers may see fewer clients needing their services, especially for smaller, less complex transactions.
How Brokers Can Stay Relevant in the Age of Embedded Finance
Embedded finance is undoubtedly reshaping the financial landscape, and brokers need to stay ahead of these trends to remain competitive. Here are a few strategies to help brokers stay relevant as embedded finance grows:
- Leverage Partnerships with Embedded Finance Providers:
Rather than viewing embedded finance as a direct threat, brokers can form partnerships with these platforms to offer complementary services. For example, a broker might provide long-term financing or specialized loans that are not covered by the shorter-term options these embedded providers offer. - Offer Tailored, High-Value Financing Solutions:
Embedded finance providers often focus on offering generic, one-size-fits-all solutions. Brokers can differentiate themselves by offering more customized financing solutions that meet the unique needs of specific industries or credit profiles. This specialization can help attract clients who need more than what embedded finance offers. - Stay Tech-Savvy:
Brokers should adopt technology that makes their own processes more efficient and integrates with the digital platforms their clients are using. Automation, data analytics, and digital lending platforms can help brokers provide a more seamless experience while remaining competitive against embedded finance providers. - Build Strong Relationships with Clients:
Embedded finance solutions are often transactional, with limited emphasis on building long-term relationships. Brokers can stand out by focusing on deep, consultative relationships with clients, providing advice, personalized service, and long-term financial planning.
Conclusion: Embedded Finance—A Growing Force That Can’t Be Ignored
The rise of embedded finance presents both significant opportunities and threats to commercial finance brokers. As companies like FundThrough, Balance, Resolve, and Parafin continue to expand their reach, brokers must adapt by embracing partnerships, offering tailored solutions, and investing in technology to stay competitive.
By recognizing where embedded finance can complement their services and where it might disrupt them, brokers can not only survive in this evolving landscape but also thrive by offering high-value, differentiated services that go beyond the capabilities of embedded finance providers.
