The B2B Fintech Surge: How B2B Fintech is Reshaping Enterprise Finance?

In the complex world of finance, where every penny matters, businesses are constantly seeking innovative solutions to streamline their operations, manage finances efficiently, and mitigate risks. In this era of digital transformation, traditional enterprise finance systems, known for their cumbersome paperwork and sluggish processes, are giving way to cutting-edge technologies. This evolution has a name: B2B Fintech. With the global financial landscape changing rapidly, this is a pivotal moment for businesses to redefine how they secure and manage their financial resources. Let’s delve into this transformative world of B2B Fintech and explore how it’s shaping the future of finance for enterprises

Amit Singh

B2B (business-to-business) Fintech is poised to revolutionize how businesses conduct financial transactions, process payments, manage risk, and more. The rise of B2B Fintech resembles a financial renaissance, opening new avenues and novel approaches for companies to manage their finances adeptly.

B2B Fintech comprises a diverse array of financial technologies and services explicitly tailored to businesses. From payment processing and cash management to lending and risk evaluation, B2B Fintech offers an array of solutions designed to optimize financial operations and enhance overall efficiency.

Vineet Tyagi, CTO of Biz2x, articulates this transformation, “B2B Fintech has democratized the financial landscape, making sure a diverse range of businesses can access capital. In essence, it has redefined how enterprises and SMEs secure and manage their financial resources.”

Burgeoning B2B adoption

The Fintech sector, currently accounting for a minor 2% share of the total global financial services revenue, is anticipated to achieve a substantial milestone by generating around $1.5 trillion in annual revenue by the year 2030. This estimated figure represents a significant surge, constituting nearly 25% of the overall valuations in the global banking industry. Recent market assessments highlight the Asia-Pacific (APAC) region as the primary contributor to this growth, with particular emphasis on emerging Asia, encompassing countries like China, India, and Southeast Asia. The proliferation of Fintech companies in these regions is expected to play a pivotal role in expanding financial inclusion.

India, recognized as one of the world’s most rapidly expanding Fintech markets, boasts a thriving ecosystem comprising over 2,000 Fintech startups officially acknowledged by the Department for Promotion of Industry and Internal Trade (DPIIT). This number is continually increasing, signifying the industry’s remarkable growth trajectory. The Indian Fintech sector is on track to substantially enhance its market size, projected to reach an impressive $150 billion by the year 2025. With the widespread adoption of digital payment mechanisms, particularly the Unified Payments Interface (UPI), reaching a turning point, it is foreseeable that these innovative modes of financial transactions will account for nearly 65% of all payments by 2026.

India presents a unique case of comparatively lower penetration of financial products/services coupled with the explosive adoption rate of Fintech, making it one of the most attractive destinations for investments globally. Avinash Godkhindi, MD & CEO of Zaggle, accentuates the impressive Fintech adoption in the country, “India’s Fintech adoption rate is an impressive 87%, the highest globally. It not only reflects the inherent value these solutions offer but also highlights the readiness of businesses and consumers to integrate these tech-driven financial tools into their operations and daily lives.”

Arun Tikoo, CBO, Cashfree Payments, adds that the Fintech ecosystem is expanding, with 50% of new Fintech registrations occurring in tier-two and tier-three cities. India is likely to become the global leader in the Fintech sector, with innovations that will set new standards in the industry.

As Fintech continues to see double-digit expansion, the lion’s share of the market’s growth now comes from B2B Fintech. “In 2018-2019, we averaged about Rs 1,000 crore per annum in financing for MSMEs supplying to corporate customers. In 2023-24, we’ve scaled up to approximately Rs 4,000 crore a month, or over Rs 40,000 crore per annum. It’s a testament to the adoption of supply chain finance and B2B Fintech overall,” explains Sundeep Mohindru, CEO, of M1xchange.

Moreover, since the second wave of the pandemic subsided in 2021, there has been a significant surge in digital onboarding and data-driven solutions adoption. “This surge has resulted in impressive growth for B2B Fintech companies, often at a minimum rate of 2x YoY. Interestingly these companies achieved this growth while working towards profitability, effectively reducing negative margins YoY. This trend is expected to weigh heavily on future investments,” says Nageen Kommu, Founder and CEO, Digitap.ai.

What’s particularly striking is the growing appeal of B2B Fintech solutions in traditionally conservative sectors such as manufacturing and healthcare. “Manufacturing companies are using digital lending platforms to streamline working capital loans, reducing borrowing costs and enhancing cash flow. In healthcare, the integration of Fintech tools has revolutionized revenue cycle management, with one hospital chain automating billing processes, reducing errors by 30%, and accelerating revenue collection,” reveals Tyagi of Biz2x.

B2B Fintech dominance in funding

The period post-2015 marked a significant boom in B2B Fintech when companies started to digitize lending processes. They outsourced functions such as KYC, data verification, and onboarding to specialized B2B Fintech providers. This marked the genesis of B2B Fintech as a distinct industry.

“Today, B2B Fintech is evolving towards becoming more than just onboarding specialists. These companies are striving to be data-driven and analytical. The future holds the promise of advanced data solutions and analytics that help financial institutions make more informed decisions, cross-sell effectively, and enhance customer experiences,” shares Kommu of Digitap.ai.

However, 2022 was a trying year for the overall Fintech industry which faced uncertainties related to geopolitical conflicts, supply chain challenges, as well as rising inflation and interest rates. Macroeconomic headwinds weighed on consumer-facing businesses, forcing many to undergo mass layoffs and scale back on their expansion plans.

These market conditions have prompted investors to turn their focus on B2B Fintech companies, which many argue are more shielded from market volatility and are poised for strong growth amid digitalization efforts.

In contrast to B2B models, B2C business models exhibit greater susceptibility to the effects of escalating inflation, fluctuations in interest rates, and macroeconomic uncertainties. Moreover, it’s essential to recognize that the B2C Fintech sector is considerably more saturated than its B2B counterpart. This heightened saturation implies intensified competition in acquiring customers and necessitates a relentless pursuit of rapid growth, often at the expense of profitability, to attain the critical mass required for the sustainability of their business model.

“When it comes to the B2B Fintech space, there’s a distinct difference. Most companies in this sector have shown a unique ability to demonstrate profitability. A considerable number of B2B Fintech companies, especially those focused on software-as-a-service (SaaS) and AI-based solutions, have showcased their ability to not only generate revenue but also to turn a profit,” explains Kommu of Digitap.ai.

Interestingly, many B2B Fintech companies require a smaller client base, each contributing significantly more in revenue. In contrast, B2C Fintech firms often allocate substantial resources to marketing efforts. On the B2B side, a network effect frequently comes into play, where each new client brings a network of partner companies that can be leveraged.

The increasing interest in B2B Fintech is evidenced by its current dynamism and robust venture capital (VC) funding activity. Notably, the B2B Fintech sector has weathered the global VC funding pullback better than its B2C counterpart.

In 2022, VC funding for B2C Fintech witnessed a substantial 47% decline, plummeting from $57 billion to $30 billion. In contrast, B2B Fintech VC funding only decreased by 32%, moving from $93 billion in 2021 to $63 billion in 2022.

Furthermore, it’s worth highlighting that the B2B Fintech sector has managed to secure a significantly larger amount of global funding compared to B2C Fintech. This amount is more than twice the funding raised by B2C Fintech companies in the previous year.

Opportunities in payment platforms, SME lending solutions, and SaaS-enabled back office tools have investors lining up behind B2B-focused Fintech companies. “The B2B Fintech sector has witnessed a surge in investment over the past three years. The investments primarily span various segments, whether it’s in open banking, supply chain finance, trade finance, or B2B term loans. B2B Fintech companies operating in these domains have attracted substantial investments,” adds Mohindru of M1xchange.

B2C Fintech entering the B2B space

While B2B Fintech has been primarily associated with startups and companies catering exclusively to business needs, a noteworthy trend is emerging in India. Several B2C Fintech companies are making inroads into the B2B space, expanding their horizons and leveraging their expertise to offer financial solutions for enterprises.

Traditionally known for serving individual consumers with services like digital payments, personal loans, and investment platforms, these B2C Fintech companies are diversifying their service portfolios. This shift signifies an awareness of the evolving needs of businesses and the immense growth potential within the B2B space.

Fintech companies that originally focused on user-friendly payment platforms are now integrating business-friendly features. They’re offering solutions such as automated invoicing, vendor payment portals, and simplified accounting tools that cater specifically to the needs of SMEs.

B2C Fintech companies possess vast amounts of user data collected from their consumer-focused services. They’re now leveraging this data to offer B2B customers insights into their financial operations. AI-driven analytics and reporting tools help businesses make informed decisions and optimize their financial strategies.

The entrance of B2C Fintech companies into the B2B landscape is changing the market dynamics. The competition is intensifying as B2C companies compete with traditional B2B-focused Fintech startups. This competition is poised to drive innovation and lead to more tailored solutions for businesses.

Corporate payment platforms: Revolutionizing transactions

B2B Fintech platforms for corporate payments are transforming the way businesses make transactions. These platforms simplify payment processes, offering secure, efficient, and cost-effective options tailored to corporate needs. From digital wallets to advanced payment gateways, these platforms are making traditional paper-based transactions obsolete.

“Partnerships between banks and B2B Fintechs have enabled hyper-focused products and embedded financial products and services across banking, payments, lending, co-branded cards, and so on,” shares Arun Tikoo, Chief Business Officer, Cashfree Payments.

“B2B payment platforms allow seamless, high-volume transactions interlinked with multiple banks. These solutions enable companies to process hundreds of transactions per second, whether it’s refunds, gig payments, or employee salaries,” he adds.

Indeed, the simplification of cross-border payments and currency exchange through B2B Fintech has been a game-changer for companies engaged in international trade, offering smoother transactions and reducing complexities, highlights Madhusmita Panda, Chief Marketing Officer at KredX.

Payment platforms provide an array of benefits for enterprises. They offer security and transparency, significantly reduce transaction costs, and streamline reconciliation processes. “These platforms offer extensive integration capabilities, allowing seamless connection with accounting and financial systems. With dynamic routing across multiple acquiring banks and saved payment instrument details, these platforms optimize payment conversion rates by as much as 15%,” reveals Tikoo.

One of the key features of these platforms is the integration of AI-driven chatbots. These chatbots offer quick and efficient problem-solving, providing seamless user experiences when addressing customer inquiries or resolving issues.

Business loan platforms: Streamlining credit access for businesses

Business loan platforms are revolutionizing how SMEs access credit. These B2B Fintech solutions offer streamlined processes for credit applications, approvals, and disbursements. They leverage data analytics and automation to provide businesses with faster access to capital, helping them seize opportunities, invest in growth, and navigate financial challenges effectively.

“Within the lending landscape, the adoption of B2B Fintech by lenders has started to reduce turn-around times in a number of borrower segments and products. It also provides lenders with a better understanding of their customers through deeper analytics,” says Lucas Bianchi, Co-Founder and Director of Namaste Credit. “In fact, the lines between independent business loan platforms and traditional lending institutions are not as clear as they used to be, given the increasing use of B2B Fintech solutions by BFSI incumbents like banks and large NBFCs.”

Business loan platforms play a crucial role in enhancing credit accessibility for SMEs. They consider an array of data points to assess creditworthiness, going beyond traditional credit scores. This inclusive approach empowers a broader range of businesses to secure financing, including those with limited credit histories or unique financial situations.

“These platforms offer pronounced efficiency gains in areas such as loan origination with accelerated credit assessments leading to quicker approvals. In addition, enhanced loan management automates tasks like payment processing, reduces manual errors, and aids in credit monitoring, mitigating risks, and minimizing defaults,” explains Tyagi of Biz2x.

By automating the lending process business loan platforms reduce labor and operational expenses significantly. “Additionally, our data analytics enhance risk assessment, minimizing defaults and associated costs. We have documented cases where clients reported up to a 30% reduction in operational costs and a 15% decrease in default rates within the first year of implementing our platform,” shares Tyagi.

Bianchi of Namaste Credit highlights that large banks and NBFCs that license its platform have been able to reduce costs of onboarding and underwriting by 60-80%. “One of the top-10 global banks has improved its operating efficiency of underwriting SME borrowers by over 60% over the past couple of years. Another top-10 NBFC has been able to enter multiple new product segments with our onboarding platform, spending just 25% of what they would have needed otherwise.”

Further, risk management and data management solutions from B2B Fintechs like Digitap.ai have proven invaluable to lending clients. “We’ve helped cut down on Non-Performing Assets (NPAs) of our clients significantly. Some clients have reduced their NPA figures from double digits to single digits. In fact, using our scoring models, a few clients experienced a remarkable 1-2 percentage points reduction in NPAs,” reveals Kommu of Digitap.ai.

Supply chain finance solutions: Strengthening supplier relationships

B2B Fintech companies are filling the gap left by banks’ withdrawal from SME lending, leveraging big data analytics to enhance the creditworthiness assessment process.

This means that instead of directly competing with banks, a lot of B2B Fintech companies actually complement traditional financial institutions. This approach makes many of the B2B Fintech’s business models readily scalable and sustainable (not only in alternative lending but also in payment processing and workflow streamlining).

For enterprises, supply chain finance solutions are a game-changer. They facilitate smoother supplier relationships, ensuring that suppliers are paid on time. This not only strengthens trust but also streamlines the procurement process, allowing businesses to negotiate favorable terms and discounts.

“B2B Fintechs enable suppliers to obtain affordable financing based on their outstanding invoices. This reduces their cost of capital and the need for them to pass on financing costs to buyers. The availability of financing can also help suppliers take on larger orders or invest in capacity expansion, further benefiting the buyer-supplier relationship,” underlines Panda of KredX.

In addition, B2B Fintech platforms often offer risk assessment and fraud detection services, which can reduce the risk associated with transactions in the supply chain. By providing greater transparency and security, these platforms build trust between buyers and suppliers, especially in international trade, she further highlights.

“As the cost of doing business decreases for the supplier, thanks to the goodwill of their buyer, there is a direct ripple effect on the cost of doing business for the buyer. It’s a symbiotic relationship,” adds Sundeep of M1xchange.

In comparison to interest rates of 15-22 percent in traditional bill discounting, marketplace model like M1xchange offers amazing interest rates of 7-11 percent per annum. This improved competitiveness results in substantial savings, reducing financing costs by 5-8 percentage points, he highlights.

Supply chain finance solutions also introduce flexibility into supply chain management. They offer businesses the ability to adjust payment terms based on their financial situation, further enhancing liquidity management.

Cash management systems: Optimizing cash flow

Cash flow management is the lifeblood of any business, and B2B Fintech platforms are revolutionizing how enterprises handle their treasury operations. These platforms enable businesses to optimize cash flow, manage liquidity, and mitigate financial risks.

B2B Fintech tools assist in better cash flow forecasting, allowing companies to make informed financial decisions. Through the use of AI and ML, these platforms analyze historical financial data to predict future cash flows accurately. This level of accuracy enables businesses to allocate resources effectively, invest surplus funds, and navigate through challenging financial scenarios.

“Spend-management tools provide businesses with real-time insights into expenditures. Whether tracking operational costs, monitoring departmental spending, or forecasting future financial needs, the cash management platform gives businesses a comprehensive overview. Through swift invoice processing, automated reconciliations, and predictive analytics, it ensures that capital isn’t unnecessarily tied up,” elaborates Godkhindi of Zaggle.

B2B Fintechs like Zaggle offers a suite of tools and features to pre-empt and address financial risks. One standout feature is a real-time transaction-monitoring system. This ensures that any irregularities or suspicious activities are immediately flagged, allowing businesses to act swiftly. The system’s agility in detecting inconsistencies prevents potential financial losses and fosters trust and reliability among users.

“Besides, these platforms offer advanced fraud detection algorithms. It leverages artificial intelligence and machine learning, which analyze patterns and behaviors to identify potential threats, ensuring businesses are safeguarded against conventional and new fraud methods,” adds Godkhindi.

These tools equip businesses with foresight, enabling effective budgeting and strategic financial planning. This forward-looking approach ensures that businesses aren’t just reacting to financial challenges but are pre-emptively strategizing to optimize expenses.

“Numerous enterprises have seen operational cost reductions, with some reporting 20-30% savings. Such tangible, quantifiable benefits underscore the transformative potential of partnering with Zaggle,” states Godkhindi.

Indispensable digital technologies

The adoption of digital technologies within enterprises is a fundamental driver behind the transformative power of B2B Fintech. Indeed, B2B Fintech is riding the wave of digital transformation sweeping across industries. From automating accounting processes to harnessing data analytics for informed decision-making, digital technologies are becoming indispensable.

AI and ML are becoming increasingly important in B2B Fintech. These technologies enhance risk assessment, automate underwriting processes, and offer predictive analytics. “Payment automation, driven by digital tools, has streamlined financial operations, reduced errors, and boosted business efficiency across the board. Moreover, the integration of data analytics, artificial intelligence, and machine learning in B2B Fintech solutions has empowered companies to make data-driven decisions and improve financial management,” adds Panda of KredX.

AI is empowering businesses to harness the vast amount of financial data available to gain deeper insights. AI-driven analytics can identify trends, predict financial outcomes, and enhance financial decision-making. The integration of AI extends to chatbots and virtual assistants, offering immediate solutions to customer inquiries and improving user experiences.

“Data analytics, powered by machine learning, is shaping credit scoring and customer relationship management. Businesses are increasingly relying on alternative data to make informed decisions. This will further transform customer experiences,” says Rajesh Mirjankar, MD & CEO, Kiya.ai.

“B2B Fintech companies are now focusing on comprehensive digitization and automation, not just in customer onboarding and payment processing but in data availability as well. The advent of account aggregator networks has made it easier to access digital data, enabling more extensive automation. This is particularly important for reaching customers in rural or remote areas,” states Kommu of Digitap.ai.

Further, once touted by investors as worthless and called unprintable names by traditional financial institutions, blockchain is now at the forefront of acceptance and mainstream popularity in the global financial industry. Fintech companies are in an arms race to develop the best blockchain platform to support all types of transactions in unique contexts.

Blockchain’s immutability and enhanced security have made it a key player in ensuring the integrity of financial data and transactions. Its role extends beyond cryptocurrencies, with applications in areas such as supply chain finance and cross-border payments.

“Blockchain technology has moved beyond cryptocurrencies. It now plays a significant role in ensuring secure digital transactions and providing a transparent platform for various financial processes. Smart contracts, with terms directly written into code, are set to streamline finance operations,” says Tyagi of Biz2x.

In addition, the adoption of digital technologies is fostering greater connectivity within and between enterprises. Interconnected systems, coupled with the Internet of Things (IoT), are enabling seamless financial transactions and data sharing. This connectivity is particularly crucial for sectors like logistics and supply chain finance, where real-time information is invaluable.

A transformative force in enterprise finance

The rise of B2B Fintech is nothing short of a revolution in enterprise finance. This multifaceted sector has a profound impact on businesses, from streamlining transactions to enhancing cash flow management and mitigating financial risks.

B2B Fintech solutions are a powerful ally for businesses, offering cost savings, improved liquidity, risk mitigation, and operational efficiency. The technology-driven approach to enterprise finance simplifies traditionally complex processes and empowers businesses to make data-driven decisions.

The rapid emergence of neo-banks and the increasing API readiness of traditional banks and NBFCs highlight the shift toward a more open, collaborative financial ecosystem. This convergence of traditional finance and innovative tech solutions is creating grounds for novel services, products, and business models,” expresses Godkhindi of Zaggle.

The globalization of supply chains presents a vast opportunity for B2B Fintechs to facilitate cross-border transactions and financing, capitalizing on the demand for efficient and reliable solutions in international trade. “Ongoing technological advancements, particularly in blockchain and artificial intelligence, offer the potential to enhance the efficiency, security, and transparency of supply chain finance and invoice discounting processes, adding to the sector’s allure,” shares Panda of KredX.

At the same time, digital financial solutions present a unique opportunity to consolidate extensive data efficiently on B2B Fintech platforms. “Harnessing this data intelligently is the key to enabling financial innovations like deep-tier financing to extend the financial reach one step further down the chain. Over the next three to five years, we anticipate a significant shift in this direction, marking the next stage of our industry’s evolution,” says Mohindru of M1xchange.

Another promising area is the continued evolution of AI and ML. These technologies are poised to revolutionize everything from risk assessment and fraud detection to personalized banking solutions and predictive financial analytics. As these tools become more refined and accessible, their integration within B2B Fintech platforms will offer businesses unparalleled insights and efficiencies.

As B2B Fintech continues to expand and evolve, enterprises stand to benefit from new opportunities and innovations. The key to unlocking the full potential of these solutions is understanding their capabilities and integrating them into financial strategies. In doing so, businesses can embark on a journey of financial transformation, powered by the ever-growing influence of B2B Fintech.