# Online marketplaces: embracing embedded finance to benefit both customers and vendors      Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-09-27 Category: TECHNOLOGY Category URL: https://financedigest.com/category/technology Meta Title: How BaaS Providers Are Driving Growth in Online Marketplaces Meta Description: Discover how merchant financing, facilitated by BaaS providers, offers small businesses quick access to credit and empowers vendors to control cash flow, URL: https://financedigest.com/online-marketplaces-embracing-embedded-finance-to-benefit-both-customers-and-vendorshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/istock-1359853031-1736815151229-compressed.jpg) ![Tom Bentley, CCO, Vodeno](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/tom-bentley-450x449-1736815151222-compressed.jpg) _By_ **_Tom Bentley,_** _CCO,_ [_Vodeno_](https://vodeno.com/) Global retail eCommerce sales are expected to total [$5.5 trillion](https://www.insiderintelligence.com/content/global-ecommerce-forecast-2022) worldwide in 2022, an increase of more than [five times](https://www.insiderintelligence.com/content/global-ecommerce-forecast-2022) in the space of a decade. In this booming sector, online marketplaces are growing rapidly – by 2025 In large part, this growth has been driven by changing consumer behaviour. The effortless ‘one-stop-shop’ nature of online marketplaces has propelled their growth, with 81% of consumers citing convenience, competitive prices (63%) and a wide product range (52%) as reasons for their appeal. As competition in the online marketplace sector grows, those wanting to retain the best vendors and largest [customer bases are looking to embedded financial products to add value](https://www.financedigest.com/financial-companies-delivering-better-value-for-customers-in-loyalty-programmes-compared-to-other-sectors.html "Financial companies delivering better value for customers in loyalty programmes compared to other sectors") and help accelerate the business of their vendors. Banking-as-a-Service (BaaS) providers have unlocked the ability of [non-financial companies – like online marketplaces – to offer these financial products](https://www.financedigest.com/50-of-consumers-wont-spend-more-than-20-minutes-applying-for-financial-products-online.html "50% of consumers won’t spend more than 20 minutes applying for financial products online") directly into their ecosystem, setting an innovative path toward growth and vendor retention. **Merchant financing: helping to accelerate** [small business BaaS providers, with the necessary [regulated and licensed banking](https://www.financedigest.com/swiss-regulator-monitoring-banks-and-insurers-after-svb-collapse.html "Swiss regulator monitoring banks and insurers after SVB collapse") partner, can facilitate lending between online marketplaces and vendors through merchant financing. Merchant financing is a lending solution that [offers up-front capital that can be used to produce or buy](https://www.financedigest.com/mfe-offers-to-buy-1-05-stake-in-mediaset-espana-from-vivendi-ahead-of-delisting.html "MFE offers to buy 1.05% stake in Mediaset Espana from Vivendi ahead of delisting") goods, with repayments drawn from the revenues of those goods once they are sold. The ability to easily access credit combined with the flexibility to repay through revenues is [invaluable to small businesses](https://www.financedigest.com/making-your-accountant-an-invaluable-asset-to-your-business.html "MAKING YOUR ACCOUNTANT AN INVALUABLE ASSET TO YOUR BUSINESS"). Although still in its relative infancy, merchant [financing is an effective and efficient way](https://www.financedigest.com/3-key-ways-you-can-transition-from-finance-to-fintech.html "3 key ways you can transition from finance to fintech") for marketplaces to offer vendors credit. By providing fast and reliable access to credit, the marketplace directly [supports its vendors’ growth](https://www.financedigest.com/synapse-appoints-new-finance-and-operations-manager-to-support-the-rapid-growth-of-the-business.html "Synapse appoints new Finance and Operations Manager to support the rapid growth of the business"). For vendors, the benefits are clear – the [finance is repaid once goods are sold and profits](https://www.financedigest.com/bootmaker-dr-martens-warns-on-profit-as-finance-chief-walks.html "Bootmaker Dr Martens warns on profit as finance chief walks") are realised, empowering their vendors to take full control of their cash flow in line with turnover. With the effective use of such capital, vendors are likely to experience greater sales volumes. As a result, the marketplace can experience its own growth, all while bolstering its vendor relationships and fostering [greater client](https://www.financedigest.com/iris-acquisition-enables-accountants-to-add-greater-value-to-their-clients.html "IRIS acquisition enables accountants to add greater value to their clients") retention. In essence, working with a BaaS provider to offer merchant financing allows [online marketplaces to act as both bank](https://www.financedigest.com/dutch-online-bank-bunq-applies-for-u-s-banking-licence.html "Dutch online bank Bunq applies for U.S. banking licence") and sales partners to vendors. With consumers expecting variety, convenience and competitive prices, online marketplaces must place the retention of their best vendors at the heart of their [growth strategy](https://www.financedigest.com/industrial-gauges-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "Industrial Gauges Market Competitive Growth Strategies Based on Type, Applications, End User and Region"), and merchant financing provides an effective solution for those looking to achieve this. **[Embedded finance:](https://www.financedigest.com/why-embedded-finance-will-be-integral-in-the-future-of-b2b-marketplaces.html "Why embedded finance will be integral in the future of B2B Marketplaces") wide market appeal** Merchant financing is one [way BaaS providers are enabling embedded finance to create customer](https://www.financedigest.com/customer-engagement-whos-leading-the-way.html "Customer engagement – who’s leading the way?") journeys that are both frictionless and integrated with value-added banking products at the right time. By offering BaaS-powered solutions on their platforms, online marketplaces help grow and retain their best vendors, in turn, those vendors [bring in the best customers](https://www.financedigest.com/visionary-banks-fight-the-blur-hybrid-computing-architecture-brings-a-faster-sharper-customer-experience.html "Visionary banks fight “the blur”: Hybrid computing architecture brings a faster, sharper customer experience"). Marketplaces that also offer embedded financial solutions directly to end [customers enhance consumer spending power](https://www.financedigest.com/ai-will-power-95-of-customer-interactions-by-2025.html "AI will power 95% of customer interactions by 2025"), bringing increased sales for vendors. These methods create a virtuous circle for the platform, vendor and customer. As [vendors expand their business](https://www.financedigest.com/cup-holder-market-emerging-industries-challenges-and-threats-faced-by-key-vendors-and-global-business-outlook-till-2031.html "Cup Holder Market Emerging industries, Challenges and Threats Faced by Key Vendors and Global Business Outlook till 2031"), they attract more customers, resulting in growth for the marketplace. For context, the global embedded finance market is [expected to grow in value from $43 billion in 2021 to $248 billion in 2032](https://www.futuremarketinsights.com/reports/embedded-finance-market). Again, online marketplaces stand to be a key beneficiary of this boom. ## **The state of play** Through powerful Application Programme Interfaces (APIs), BaaS [providers offer embedded financial](https://www.financedigest.com/mazars-to-acquire-financial-modelling-consultancy-and-training-provider-corality-financial-group.html "Mazars to acquire financial modelling consultancy and training provider, Corality Financial Group") solutions that are quick and easy to implement and cost-effective, allowing clients to offer solutions that are tailored to the make-up and needs of their customer base. As online marketplaces combine both a B2B and B2C proposition, they can access the full range of [opportunities that BaaS and embedded finance](https://www.financedigest.com/how-finance-leaders-can-turn-the-inflation-challenge-into-opportunity.html "How finance leaders can turn the inflation challenge into opportunity") provide. Through the power of BaaS, online marketplaces can serve as [sales enablers and banks for both vendors and customers](https://www.financedigest.com/lumen-research-expand-us-operations-with-key-sales-and-customer-success-hires.html "Lumen Research expand US operations with key sales and customer success hires") and truly fulfil their ‘one-stop shop’ promise. ## **_Author Bio:_** _Tom Bentley is the Chief Commercial Officer of_ [_VODENO_](https://www.vodeno.com/) _. Tom is an expert in the banking and [financial services sector](https://www.financedigest.com/overcoming-information-overload-in-the-financial-sector.html "OVERCOMING INFORMATION OVERLOAD IN THE FINANCIAL SECTOR") with more than 12 years of experience._ _Tom joined VODENO from Thought [Machine where he was responsible for growing its business](https://www.financedigest.com/pitiless-machines-will-kill-your-business-if-you-dont-respond-now-warns-servion.html "‘Pitiless machines’ will kill your business if you don’t respond now, warns Servion") across Europe. Prior to Thought Machine, he held [executive roles at banking](https://www.financedigest.com/societe-generale-says-two-senior-executives-to-leave-bank.html "Societe Generale says two senior executives to leave bank") software company, Temenos, across Asia and Australia, working with some of the most disruptive fintechs in the world._ --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---