What

Galileo is a SoFi-owned technology platform focused on enabling companies and innovators to build payment and banking programs. Galileo connects these programs to traditional payment rails by creating an API layer, while also holding the system of record for clients.

In collaboration with Juniper, Galileo recently released a report showing that 63% of B2B businesses offer an embedded finance solution.

Why

According to Seth McGuire, Galileo’s CRO, the B2B push into embedded finance is the result of growing digitization as well as a recognized need for more revenue streams. Perhaps counterintuitively, McGuire said, many businesses have looked to launch embedded finance platforms in the face of headwinds.

“Not all [businesses] will make that investment, you’ll have a lot of people retreat to their hole,” McGuire said. “But I think a lot of the companies that will be successful are going to say, ‘Hey, this is a great time to make sure I'm serving my customers with something differentiated, because I can't afford to lose them, and this is a great time to improve cash management, because I can't be confident of getting loans or working capital that I need, and this is a great time to think of multiple revenue sources, because I need to diversify and I don't know what's going to happen in the next two or three years.’”

McGuire has also noticed a change in staffing at B2B operations that has contributed to greater customer-side expertise in embedded finance. “We’re having conversations with people who worked at Visa for ten years and then joined a startup, or worked in banking and did commercial deals,” McGuire said.

And finally, businesses see embedded finance as a way to develop stickiness and loyalty with customers. Seeing how existing relationships can deepen through loan installments or credit lines requires deep understanding of how the B2B dynamic currently functions. “That's why we think an API layer is so critical to this,” McGuire said. “It's embedding that experience organically in your relationship already.”

How

In anticipation of this trend, Galileo began shifting its sales funnel a year and a half ago, pivoting from more of a B2C focus toward B2B. The sales team avoids pitching embedded finance as a general concept to potential customers, but instead helps businesses transform general existing interest in embedded finance into a specific technological roadmap. Galileo specifically looks to create embedded finance programs that are most useful for businesses’ clients, and, by extension, generate loyalty and long-term value for B2B businesses.

“If you start getting 100 emails from every supplier about a banking program, you're going to go nuts, versus someone saying, ‘Here's value I'm bringing to the table from our relationship,’” McGuire said. “That middle of the funnel conversation matters, where we can direct you to help you build the right program.” That kind of program also has a lower acquisition cost, and promises a longer lifetime value.

“The more clients do your banking with you, the stickier they are, because it's much harder to move that business, and you can start to help with corporate expense or payroll or other concerns,” McGuire said. “You're delivering a real value-add that removes another cost from them, and then helps make them stickier to you… it isn't just about interchange payments, it’s about creating value with a set of stakeholders.” McGuire thinks the companies that prioritize long-term thinking about customer needs have seen success in 2022, and will continue doing so into the uncertainties of the coming year.