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Empowering Small Businesses: The Rise of Embedded Finance Solutions

27 Jun 2023 n-img-empowering

Financial institutions, especially traditional banks, are having a rough time due to the emergence of a new paradigm for financial management. It’s called embedded finance, and it enables companies to integrate financial services seamlessly with non-financial products. This integration leads to an inclusive and interconnected experience for the customer, enhancing the overall satisfaction rate. However, traditional finance organizations are hesitant to adopt newer technologies. On the other hand, FinTech companies and challenger banks (often referred to as neobanks) are leveraging embedded finance to solidify their presence in the market. RecordMe accounting automation service offers you the chance to be a part of this ecosystem to streamline business finances and improve customer journeys across your products.

A Completely New Environment for Small Businesses

Small businesses represent the backbone of the economies in European and developing countries. However, recent financial trends indicate that traditional banks are hesitant to offer corporate services to these businesses due to a lack of credit history. It negatively impacts their loan applications and plans to pursue growth. Granted, it is challenging for banks to assess and monitor the risk associated with such companies, it should be noted that it puts financial stability pressure on small and medium business enterprises (SMEs).

Meanwhile, the pending threats of a global recession are further escalating the feeble economic conditions of SMEs. An IFO survey result reveals that 73% of small businesses have been forced to increase their inventory at a higher cost since 2020 to cater to the rising customer demands. The combined impact of these circumstances paves the way for hybrid services like RecordMe digital accounting solutions that help businesses maintain their finances for bank audits.

The Bank Financing Barrier

Various factors shaped the macroeconomic and microeconomic landscape of the financial landscape for SMEs. As discussed, some of these factors include an absence of credit lines, impending recession, and financial stability of the origin countries of SMEs. An even more striking fact is that some of these factors merge to make it difficult for SMEs to survive in the current economic landscape. The infographic below details this survey’s important points, revealing a shocking bank financing barrier for small businesses. Moreover, asymmetric information and a lack of organization in small companies make it even less attractive for banks to lend money to SMEs.

The European Investment Bank noted that this financing gap stood at €20 billion in 2018. Although it has decreased in the past few years, it is still significant enough to hurt company finances. This is where the RecordMe accounting automation solution enables SMEs to bridge the gap by helping them fulfill banks’ eligibility criteria.


The Emergence of Embedded Finance Solutions

Keeping these issues in view, the core principle of embedded finance is to provide unparalleled accessibility and convenience to customers. It must be noted that this concept is not an entirely new process. In fact, services like PayPal pioneered this wave of FinTech transformation. However, the widespread adoption of digital technologies in the post-Covid era has fast-tracked the endorsement of embedded finance. A renowned Venture Capitalist, Lightyear Capital, published a report that estimates the market for embedded finance will reach $230 billion by 2025. This valuation marks a significant increase from 2020.

Now, customers expect the integration of non-financial products, such as online shopping, with their bank accounts. It poses multiple problems for small businesses as they cannot secure the funding to scale their operations. RecordMe online bookkeeping services were designed to keep these issues in view. By leveraging cutting-edge AI, RecordMe financial bot enables businesses to streamline their internal financial workflows and communications.

How can RecordMe Financial Bot Help?

Embedded finance transforms the entire financial ecosystem to ensure a collaborative model between large-scale and small organizations. In general, it refers to the merging of a multitude of financial products with non-financial service providers. It relies on the mutual effort of all parties involved to achieve success. Therefore, SMEs must streamline their internal communications and finances to deliver value in a partnership-focused model. This is where the RecordMe accounting automation service proves beneficial. Communication platforms are the backbone of any company, their delays and gaps can lead to reduced productivity. RecordMe accounting automation solution enables default integration with Slack to get you up and running in a few seconds. More than that, you can request integration with your preferred communications platform to minimize the friction when installing the bookkeeping services of RecordMe.