The trajectory of innovation in the B2B payments and commerce space has largely been attributed to the influence of the B2C arena.
Digitization of everything from product sourcing to online checkout has embraced the consumerization effect, giving rise to phrases like “the Amazon-like experience” becoming the gold standard of B2B.
The evolution of consumer payments and commerce has no doubt had an impact on the way professionals wish to procure, pay for and finance items for corporates. Yet in the world of equipment leasing and finance, to say that the recent embrace of digitization and embedded financing at the point of sale (POS) can be traced back to consumer trends may be a bit of an oversimplification.
That’s because the workflows associated with equipment procurement and financing are inherently far more complex than consumer purchasing processes. And according to KWIPPED Founder and CEO Robert Preville, the continued modernization of this industry probably won’t exactly follow in B2C’s footsteps.
In a conversation with PYMNTS, Preville explained why the time is ripe for equipment leasing and finance to take a more integrated approach to a better experience, not only for buyers and sellers, but for lenders, too.
An Optimistic Recovery
Equipment leasing is big business and has emerged as one of the most resilient verticals amid the pandemic.
“The demand is there,” said Preville. “I would argue that the demand is pent up.”
That’s good news for firms like KWIPPED, which stepped out onto the market with the goal of providing an online marketplace for organizations in need of either short-term equipment rentals, or long-term leases with the intent to eventually purchase the item.
Yet modernizing the process of sourcing equipment doesn’t solve all of the workflow headaches for corporate customers. Financing is a crucial component to the leasing process, and yet a peek into the industry revealed a major disconnect between the procurement and financing process.
Preville said he discovered that while the majority of B2B equipment purchases involve financing, less than 10 percent of equipment suppliers were able to incorporate financing as part of their sales process. This was a glaring oversight that Preville noted added significant friction to the leasing process, harming both buyers and sellers.
“It’s really surprising that embedded finance hasn’t gained more traction sooner,” he said. “The traditional procurement process, it starts with a problem or an application. You go through a solution discovery process, and then a vendor identification process. It’s always an afterthought, how you’re going to pay for it.”
With the recognition that understanding affordability is paramount for buyers and can be a key competitive differentiator for vendors, KWIPPED earlier this month launched APPROVE, an embedded equipment finance solution for sellers that integrates financing right at the POS.
Its Own Path Forward
While embedded POS financing has blossomed in the B2C space, Preville was hesitant to attribute the equipment leasing industry’s adoption of the tool as a reflection of its desire to follow in B2C’s footsteps. That’s because the equipment procurement process is far more complex than consumer purchases and indeed may not participate in the B2B eCommerce revolution as deeply as other B2B verticals have.
As Preville explained it, “You’re not going to put a $50,000 medical X-ray machine into a shopping cart and check out with a credit card.”
Products must be configured and customized, bundled with warranties and services like installation, support and training, and sometimes even shown in person. Providing that “Amazon-like experience” likely isn’t the most effective way to combat friction for buyers and sellers.
What’s more, when it comes to embedded finance, the complexities of the market have also forced this industry to take its own path forward. While demand for equipment was on the rise last year, Preville noted that a credit squeeze led to lower approval rates — although there is evidence that trend is reversing.
Past efforts to embed equipment financing providers at the POS ran into roadblocks in two ways. Financing either had a high approval rate but higher costs, or a lower approval rates but greater affordability, leaving equipment sellers in a frustrating position.
Preville noted that by combining an ecosystem of financiers within APPROVE, buyers have more options and a greater chance of finding the right match. For sellers, that means a better customer experience. And for lenders, it means new avenues for leads — a three-way win that may not be possible if the industry followed the blueprint of B2C eCommerce and POS financing.
“This isn’t about squeezing as much margin out of your supply chain as possible,” said Preville. “This is about tech enabling a procurement process to make it as efficient as possible, so that the parties out there can find each other and do business with each other.”