Embedded finance is often defined as financial services on the consumers’ terms. This amalgamation of traditional financial services with non-financial companies creates seamless experiences for customers by streamlining their access to services like payments, loans, and accounts – but it isn’t the only type of embedded system making a wave out there.
The battle for customer loyalty and retention online has also prompted a demand for value-added services to be embedded into their experiences – such as fraud management, know-your-customer, compliance, insurance, and loyalty rewards. By plugging non-traditional offerings into their platforms using APIs and harnessing the “better together” proposition, businesses can enhance the customer journey by creating new value for them.
Not so long ago the high street was king when it came to shopping. Businesses could peddle their wares in physical stores without worrying much about creating new value for their customers – for whom choice was limited compared to today. The exponential growth of the internet this century has not only sounded the death knell for the high street following a shift online; it has reshaped the battlefield for customer loyalty and retention amid an explosion in competition and changing demands.
For a business to appeal to new and existing customers and remain competitive in a crowded online marketplace, it must think beyond its core offering and add value to the relationship. One way to achieve this is to offer auxiliary services that customers will find valuable and will complement their core services.
Take banks for example, which have traditionally had a myopic view of service provision. Having spent decades building their products and services and offering one-stop banking for small businesses and personal customers, they have become hampered by a siloed approach that’s no longer viable. The modern consumer wants a relationship with their bank that extends beyond standard transactions and balance checking to the integration of complementary services – and the fintech disruptor banks are showing the legacy players the way.
As businesses are required to work increasingly hard to compete online, they must think outside the box and consider value-added services – or risk losing customers. A value-added service is a feature that can be embedded into a core product to enhance the user experience or a service that can function as a standalone product or feature – and they’ve become fundamental to customer loyalty and retention in the highly competitive online business world.
The fintechs that are driving the growth of embedded value-added services excel at understanding the customer and creating offerings specific to their requirements. This valuable insight is reimagining the scope of the businesses they support. With their blinkers removed, these businesses don’t have to rely on generic one-size-fits-all bolt-ons; they can embrace additional services that are complementary and add value to their customer’s experience.
Examples of embedded value-added services that are helping to complement businesses’ core offering include:
By focusing on their customer needs and embedding value-added services, businesses can strengthen existing relationships and build new ones – and the benefits are compelling: customer loyalty, customer retention, competitive advantage, stimulates demand for core products and services and can generate additional revenue.
The value-added proposition is not a rigid selection of services that businesses are forced to choose from; it’s a dynamic process that can be tailored to meet their customer’s unique requirements. This fluid landscape means existing value-added services are constantly being enhanced and new services are being developed and embedded into the native customer journey.
Embedded loyalty programmes that offer consumers rewards and incentives such as discounts, vouchers, cashback, and reward points are a prime example of how this constant evolution is driving growth: the number of loyalty programme memberships is forecast to grow by 33% from 24 billion worldwide in 2022 to more than 32 billion in 2026. It’s a similar story in the mobile embedded value-added services market – services offered by telecom providers to customers beyond core services like SMS, voice, and data – which was valued at $655 billion in 2021 and is expected to reach a value of $1133.85 billion by 2029.
The benefits of embedded finance – the seamless integration of financial services by non-financial companies into their digital experience to deliver new, innovative, and streamlined customer experiences – are typically viewed through a B2C lens. But the scope of this finance revolution extends beyond reducing the friction that impedes online financial transactions to breathing new life into ambitious businesses admin processes.
Embedded business management uses the banking-like services offered by nonbanks model to embed a different kind of convenient service into a business’s infrastructure: accounting tools.
According to research by salary benchmarking site Emolument, the accounting profession ranks fifth in a roundup of the most boring jobs. It might be yawn-inducing, but this crunching of numbers is vital to the successful operation of a business – and must move with the times to be effective. Traditional manual accounting processes have evolved during the digital revolution from physical books using a written ledger of transactions to spreadsheets. But even these electric documents can become confusing, time-consuming, and error-strewn – making them outdated amid the emergence of embedded business management.
As a business grows, its financial data evolves with it, becoming more complex and increasing in volume. Small and medium enterprises (SMEs) typically don’t have the resources to create a dedicated function to conduct laborious – but vital – accounting processes. This leaves them with three options: conduct them in-house when there’s time, exposing the business to errors and delays; outsource them to an expensive third-party provider, placing strain on tight budgets; or think beyond antiquated accounting methods by embedding them into the business infrastructure.
Embedded business management empowers SMEs to focus on what they care about most without worrying about the admin, which is automated and consistent. This means less effort, less time and lower costs when running a business compared to using clunky manual processes. Unshackled from repetitive admin and time-consuming processes, business owners can use their resources more proactively.
This subset of embedded finance has many beneficial branches of its own: from embedded payroll that allows business owners to set a single pay rate, to embedded bank feeds that automatically appear in accounting software, to embedded accounts payable that automate purchase orders when stock levels hit certain limits.
These core functions are often delivered using an enterprise resource planning (ERP) cloud solution: a suite of integrated applications that collect, store, manage and interpret data to gain resilience and real-time agility – and position for growth.
Examples of popular embedded business management experiences that are helping to streamline SMEs’ accounting processes include:
Embedded business management functionality is brimming with benefits:
Research by Bain Capital suggests that payments and lending will continue to be the largest embedded financial services but will be bolstered by the growth of adjacent value-added services, including tax and accounting. As the pace at which organisations transition to digital-first admin processes continues to accelerate, embedded business management functionality will become ubiquitous across the business landscape.
Check out our final instalment of the embedded ecosystem blog series – Embedded value-added services – which will look at how nonbank financial services companies can embed things like insurance into their service offerings and how it’s become instrumental in increasing customer loyalty.
If you want to learn more about partnering with Liberis, feel free to get in touch.
Born out of a desire to disrupt the traditional banking model in the wake of the 2008 financial crisis, challenger banks – or neobanks – kicked off the finance revolution. This disruptive rebellion has inspired another new breed of provider to take to the banking battlefield and challenge the old guard across a broad spectrum of services: non-financial organisations.
Empowered by the rise of embedded finance – the integration of traditional financial services or tools within a non-financial organisation’s infrastructure – businesses and their customers are benefitting from streamlined financial processes that reduce friction when accessing products and services online. Today, embedded finance pervades online transactions – but you might not even realise you are benefitting from it because of its power to smooth the customer experience.
A subset of this new distributed approach to providing financial services eliminates the need to rely on high-cost third parties – typically a financial institution – within the lending process: embedded lending.
There was a time – not so long ago – when you had to arrange a meeting with your bank manager and physically go into your local branch to apply for a loan. The lack of lending options meant banks – which held the monopoly over the lending space – were judge and jury of who was creditworthy. While the internet has given rise to a new wave of digital lending options – and diluted the role of the bank manager – traditional financial institutions continue to rely on outdated, labour-intensive legacy processes and narrow credit-decision criteria.
Take small and medium-sized enterprises (SMEs), for which restricted cash flow can be an existential threat. According to the World Trade Organisation, they represent over 90% of businesses and 60-70% of employment worldwide. Despite the vital role they play in economies across the globe, many struggle to access the funding they need to keep operating and growing.
Traditional institutions’ rigid lending framework prevents SMEs from accessing capital because they are considered too risky. This myopic view stems from a range of factors that are typical among them, including:
These lending hurdles are exacerbated by the banks’ clunky and costly client support infrastructure and convoluted application and assessment processes. Even if a loan is eventually authorised amid these time-consuming constraints, it might be too late for an SME that has a time-critical need for capital.
Embedded lending gained traction in the face of pandemic-induced lockdowns that shuttered businesses and strangled household incomes; a trend that has been perpetuated by a general demand for a frictionless, digital-first lending experience. This process of integrating credit or financing products into non-financial businesses, such as online retailers or marketplaces, allows customers to access finance at the point of need from a non-financial brand they trust – removing any interaction with a bank or other lender.
Using a customisable API (Application Programming Interface) or white label solution, digital brands can integrate embedded lending options into their technology ecosystem or e-commerce platform. This dynamic offering can be tailored to meet their specific customer needs, ensuring brand integrity remains intact. The entire lending process subsequently becomes faster, simpler, and frictionless, allowing applicants to focus on using the funds, rather than applying for them.
This convenience fosters the point of need access to capital that SMEs crave, improving their cashflow management; while consumers can access flexible payment structures that enhance their online transaction experience. Embedded lending’s innate ability to provide businesses and individuals with access to useful, affordable and responsible lending products and services underscores the role it plays in driving financial inclusion.
Buy Now Pay Later (BNPL) is an example of B2C embedded lending: a type of short-term financing that allows consumers to make purchases and pay for them at a future date. For example, Clearpay is a payment service that lends customers a fixed amount of credit to make purchases instantly before paying for them in four interest-free automatic instalments, made every two weeks.
Revenue-based finance is an example of B2B embedded lending: an alternative funding option that allows SMEs to access funding based on their overall business revenue – not just their credit history. For example, Liberis offers a revenue-based lending model driven by an intelligent data engine that automatically forecasts business transaction revenues and makes a personalised and preapproved offer – with 70% of businesses receiving their funding in less than 48 hours.
The benefits of embedded lending are being felt throughout the modern lending ecosystem: businesses and retail customers benefit from a seamless lending experience that unlocks access to funds quickly and cost-effectively; brands that embrace it benefit from a competitive advantage by augmenting and enhancing their offering; and innovative lenders are ‘inserted’ into the moment the customer identifies a funding requirement.
According to a World Bank report, the world’s SMEs have unmet finance needs of approximately $5.2 trillion a year, around 1.5 times the current lending market for businesses of this size. Against this backdrop of escalating demand for finance without friction, embedded lending is well-placed to go from strength to strength. For example, the proliferation of BNPL within the B2C space has inspired e-commerce platforms to offer lending solutions to their business customers in the UK – a trend that is expected to gather pace.
Research by Bain Capital estimates that by 2021 around $12 billion in B2B loan transactions were made via embedded finance, which it expects to increase exponentially to between $50 billion and $75 billion by 2026.
Driven by increased customer loyalty and brand value, embedded lending in the B2C space has rapidly evolved from a burgeoning value-added service into a ubiquitous facilitator of streamlined lending experiences. According to Bain Capital, around 10% of point-of-sale transactions are made via embedded finance, resulting in a transaction value of around $43 billion. By 2026, this market is expected to grow to between $80 billion and $90 billion – and there won’t be a bank manager in sight.
Check out our blog on embedded business management. Many small businesses don’t have the resources to create separate functions for important tasks like accounting. Embedded business management is the part of the ecosystem that can accommodate this allowing small business owners to focus on what they do best, growing their businesses.
If you want to learn more about partnering with Liberis, feel free to get in touch.
Astonishingly, customer-centricity – an approach to doing business that focuses on providing a positive customer experience at the point of sale to drive profit and gain competitive advantage – has traditionally been an afterthought when delivering financial interactions. This short-sighted outlook left consumers resigned to their fate: to accept the disconnect between themselves and the company they’re doing business with; a gap that’s bridged by a third-party bank they are redirected to, creating an extra layer of friction.
This clunky process is increasingly unacceptable in the modern financial services landscape, where tradition has been replaced by innovation – and customer-centricity is a prerequisite. Embedded finance has disrupted the involvement of third parties through the disintermediation of financial interactions. This seamless integration of financial services by non-financial companies into their infrastructure is not limited to streamlining the payments process; other core interactions have been enhanced by embedding them behind these organisations’ apps and websites, including bank accounts – known as embedded deposits or embedded banking.
Customer retention has never been a huge concern for traditional high-street banks – until now. Their general model is simple and effective: get someone to create an account when they’re young and assume they will bank with them for life because the hassle of changing to another similar high-street institution isn’t worth it.
With their choice restricted to a few brick-and-mortar providers that held a monopoly over the banking space – and offered the same services under different brands – consumers’ access to financial services was limited. Since the global financial crisis of 2008, however, the tide has turned amid the emergence of a broad set of tech-driven financial companies (fintechs). This new breed of provider aims to fundamentally address outdated financial services by offering access to innovation that supersedes the traditional methods used by incumbent banks – a trend that has been accelerated by the pandemic after consumers’ reliance on online functionality increased profoundly.
The conventional banking infrastructures flaws have been amplified in the face of this fintech revolution: slow in undertaking digital transformation, legacy infrastructure that lacks agility, strict regulatory standards, poor customer service, and the emergence of disruptive banking models.
Throw in the odd scandal – notably Payment Protection Insurance (PPI) mis-selling – that’s dented the public’s faith in them, and the banks’ grip on the industry has been prized loose. Take TSB for example, which in November 2021 announced that it was shutting 70 bank branches across the UK the following year as more customers switch to online.
The emergence of disruptive banking models has paved the way for embedded deposits to reshape the banking landscape: the process of incorporating specific banking tools – such as debit cards and checking accounts – into non-financial companies’ products or software, forming part of a larger bundle of services. When banking is embedded into a non-bank environment, it streamlines the customer journey while building more secure, fluid experiences into the tools they already use, increasing retention. By bringing banking to the customer, it creates simple, linear journeys that can be completed without opening a banking app or website.
Examples of popular embedded deposit experiences that are helping to drive a new era of flexible banking include:
While fintechs still dominate the conversation, banks are starting to engage in the embedded banking space. Once considered upstarts in this previously rigid sector, the banks are viewing fintechs as potential co-collaborators to help establish their own digital footprints – commonly known as banking-as-a-service (BaaS). For banks, this can open the door to new revenue streams and expansion into unbanked customer segments. But there is still a long way to go for these traditional players: according to the 2021 Economist Impact report, a little over a quarter (27%) of banks and credit unions surveyed believe their organisation has the necessary technology tools – “to a great or large extent” – to create new digital products and services internally or externally.
Embedded deposits have empowered small businesses to take control of their banking. The monopoly once held by a handful of institutions in the banking space has been broken by the choice and convenience that’s inherent to fintechs. No longer an afterthought, customer-centricity is now a cornerstone of this streamlined approach to banking.
According to recent research by Finastra, embedded bank accounts and payment cards are poised for 30% growth by 2024. This trend is echoed by Bain Capital research which estimates that by 2021, US consumers and businesses spent $3.60 trillion on their debit cards and $3.55 trillion
on their credit cards – with 3% and 4% of these transactions for debit cards and less than 1% for
credit cards, conducted using embedded banking services. By 2026, Bain Capital predicts that the nonfinancial services market penetration for debit cards could increase fivefold to around 15%.
Check out our blog on embedded lending (our speciality) and how it has changed how businesses and consumers can obtain more flexible finance options that traditional banks and lenders have been unable to provide.
If you want to learn more about partnering with Liberis, feel free to get in touch.
Put simply, embedded finance refers to banking-like services offered by nonbanks. This seamless integration of financial services by non-financial companies is a reaction to consumers’ demand for a more digital-first experience, particularly in the wake of the pandemic. One branch of this vast finance revolution has the power to streamline the previously clunky online payments process: embedded payments – but it has been a long journey to reach this inflexion point.
Legend has it that in 1994 an order for a large pepperoni pizza made history when it was placed on Pizza Hut’s new website, making it the world’s first online purchase. Three years later Coca-Cola laid claim to the first mobile payment when it allowed customers to pay for their drinks by sending text messages from their phones. Since then, online payments have become part of our everyday lives amid the exponential growth of the internet and our subsequent reliance on e-commerce.
There’s no doubt that online payments have been a game changer for businesses of all sizes – practically consigning cheques to the history books and spurring conversations about a cashless society. Take Pizza Hut for example: by 2008 its online sales topped $1 billion and by 2013 they reached $6 billion. But in an age where speed and convenience are consumer prerequisites, there is always room for improvement.
Traditionally, online payments have been handled by third parties – either large financial institutions or payment processors. This additional layer of friction means financial transactions are separate processes, with customers directed outside the service. Forced to use these third-party integrations to facilitate payments, vendors experience a disconnect with their customers, creating a disjointed user experience.
A growing expectation among e-commerce consumers that digital ecosystems should encompass every aspect of the transaction process means the middleman’s days are numbered. This has prompted an appetite among businesses for embedded payments solutions that provide the payment autonomy they need to achieve financial independence and enhance the user experience.
An embedded payments strategy – which can be tailored to businesses of all sizes – seamlessly integrates payment processing into the e-commerce shopping journey, eliminating the need for a third-party payment provider or banking service. This empowers businesses to take control of the different payment processes they are exposed to – such as wire transfers for one-off purchases of goods and services and Automated Clearing House (ACH) transactions for managing direct debits – and to harness real-time payments.
With the user experience consolidated under a single brand when making payments, businesses can access a wealth of compelling benefits:
A quick look at the World Bank’s definition of financial inclusion underscores the role embedded payments play in driving this important concept: “Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.”
Accessing an autonomous payments network that seamlessly sends and receives money internationally by streamlining processes is no longer a pipe dream for businesses and consumers.
As forward-thinking organisations rethink legacy systems and invest in digital transformation, they are embracing the opportunities afforded by embedded payments – and with third-party friction removed from the equation, it’s never been easier to buy a pizza.
The embedded payments industry embodies everything good about fintech: speed, agility, flexibility, convenience – and it’s going from strength to strength amid consumer demand for streamlined processes, with revenues expected to increase from $43 billion in 2021 to $138 billion in 2026. As embedded payments become ubiquitous throughout the online payments landscape, market research firm IDC predicts that 74% of online consumer payments globally will be conducted via platforms owned by nonfinancial institutions by 2030.
Two new trends could accelerate this market growth: embedded B2B payments and the opportunity for financial institutions to work with fintech partners to support the growing demand for embedded B2B payments. The growth of banking-as-a-service and open-access APIs are presenting businesses with the ability to leverage B2B embedded financial services technology to customise payment solutions for their needs. The IDC report states that 73% of financial institutions around the world have payments infrastructures that are ill-equipped to handle payments for 2021 and beyond. Fortunately, fintech has created a new opportunity for banks to modernise their payment services.
Take a look at our blog on embedded deposits, where we discuss how they have become a central offering of non-bank financial services companies to meet the demands of their customers.
If you want to learn more about partnering with Liberis, feel free to get in touch.
Becoming an e-commerce merchant is no longer a point of difference; it’s the default market entry point in today’s internet-enabled world. It’s estimated that world retail e-commerce sales – which are expected to total $5.9 trillion in 2023 – will exceed $7.5 trillion by 2026. To stand out from the crowd in this saturated – and uber-competitive – market, merchants must explore innovative ways to secure a share of this revenue and retain and scale it across their customer base.
Embedded lending – a subset of embedded finance – has emerged as a popular option for enhancing the value proposition of e-commerce platforms in the wake of pandemic-induced lockdowns that strangled household incomes. This process of integrating credit or financing products into non-financial businesses appeals to the modern consumers’ demand for frictionless, digital-first lending experiences – allowing them to access finance when they need it from a brand they trust.
Working with a tech-led embedded finance partner, merchants access a customisable API or white-label solution to integrate dynamic lending options into their e-commerce platform – and the benefits are compelling for both parties:
For example, Klarna – a leading global payments and shopping service – has partnered with Liberis to embed lending into their online experience. Merchants leverage this partnership by using Klarna’s services to access finance powered embedded lending.
E-commerce platforms don’t have to worry about their balance sheet when embracing alternative financing solutions because embedded lending providers like Liberis provide the initial capital and absorb the risk.
With bespoke lending options successfully embedded into their technology ecosystem, e-commerce merchants can enhance the customer’s lifetime value – the total worth to a business of a customer over the whole period of their relationship: average value of transactions, number of transactions, and churn rate.
Embedded lending can grow customers’ average transaction size and improve retention rates by providing access to seamless, streamlined, and flexible lending options – increasing their spending power and satisfaction. The result: a sustained injection of revenue that enhances cashflow management, increases purchasing power and inventory management, and accelerates growth and scalability.
By partnering with an embedded lending platform, e-commerce platforms like Klarna are able to provide small businesses with bespoke, pre-approved funding when they need it most, such as for buying stock during busy seasonal periods or to make VAT payments. This critical funding at the point of need is powered by advanced real-time data sharing between the e-commerce platform and the embedded lending platform. For example, open banking is helping to drive the democratisation of this instant funding.
Creditworthiness is a vital layer in the lending process. This risk mitigation tool has traditionally relied solely on a borrower’s credit score – a narrow approach that focuses on their current financial information. Consequently, lending decisions are determined by factors like payment history and outstanding debt, rather than their suitability to pay back the funds in the future. Embedded lending has the power to augment credit scores with forward-looking insights into a borrower’s suitability to repay a debt obligation – mitigating the risk of non or late payment.
With the loan application and approval process integrated seamlessly into the e-commerce platform’s user interface, customers can circumvent traditional lending structures that rely on legacy third parties, multiple forms, and manual processes. This streamlined experience saves time and effort for customers while providing a sense of security and reliability – enhancing trust in the platform and its lending services.
Buy Now Pay Later (BNPL) is an example of embedded lending: a type of short-term financing that allows consumers to make purchases and pay for them at a future date. Amid the proliferation of this flexible funding option, e-commerce platforms, such as Klarna, now offer instant lending solutions in the form of revenue-based finance to their SME customers – providing finance without friction for this traditionally underserved segment of the lending market.
Buy or build? A new capability is an immense drain on resources: it requires substantial programming manpower; it takes months to develop and deliver; and it demands vigorous GRC analysis. Working with a tech-led partner like Liberis that specialises in developing APIs that facilitate rapid deployment saves time and money – plus new features can be added when required. This brings the vendor selection process into sharp focus for e-commerce platforms.
To harness the power of embedded lending to offer a value-added service, you must trust this third-party provider from a security, technical, reputational, and strategic perspective. To ensure they align with your requirements and can help you achieve them, carefully consider the options available before making an informed decision. This should be viewed as a long-term investment in a meaningful partnership, not an off-the-shelf product.
E-commerce platforms that seamlessly embed lending products into their platform at the point of purchase experience a ripple effect of benefits: enhanced competitive edge leads to improved customer loyalty and greater spending power, which in turn leads to increased sales and higher average order value. With their coffers swelled by this cycle of success, they have the financial footing needed to manage cash flow with confidence, increase purchasing power and inventory management, and grow their business.
Traditionally, small and medium-sized enterprises (SMEs) simply had to understand what the customer wanted before giving it to them at the right price to make money. Today, however, there’s an added layer of complexity in the quest to turn a profit: the modern ethically conscious consumer wants businesses they engage with to put people and the planet ahead of profits. This contemporary mindset has been stoked by the climate change conversation, which has risen in volume amid a growing understanding of the damaging impact businesses are having on the environment.
Underpinning this need to create sustainable value in the modern business landscape is a commitment to invest in Environmental, Social, and Governance (ESG) issues – cementing the role of sustainability in contemporary business ethics. A cornerstone of this vital evaluation of a business’s collective conscientiousness for social and environmental factors is sustainable finance: the process of taking ESG considerations into account when making investment decisions, leading to enduring investments in sustainable activities and projects.
By leveraging sustainable finance, SMEs – the largest segment of the UK business population – can make a sizeable contribution to the UK government’s net zero strategy. And the benefits of doing so from a business perspective are compelling:
Access to finance is a major constraint for SMEs seeking to undertake sustainable investments. They typically point to the high upfront costs and limited access to finance as the main obstacle. In the EU, for example, 60% of SMEs that have undertaken resource efficiency investments and 61% of SMEs that offer green products or services have relied on their own funds.
They also face knowledge-related barriers that restrict their demand for net zero investments and sustainable finance. For example, A 2021 survey conducted by the UK Chamber of Commerce shows that only one in ten SMEs currently measure their GHG emissions.
SMEs must overcome the economic and educational hurdles that block their ability to harness sustainable finance as a driver for meaningful change. To achieve this, they must be aware of and understand the sustainable financing options available to them that reflect the benefits of sustainable practices – from government grants and green bonds to sustainable loans and development funds. For example, almost £5 billion of funding is available to help UK businesses become greener as part of the government’s commitment to reach net zero emissions by 2050
Empowered by this knowledge and understanding, they can look beyond their bank when seeking funding for sustainable initiatives. These legacy providers’ rigid lending frameworks have perpetuated erroneous assumptions that SMEs are too risky to engage with – depriving them of the funds they need to thrive.
They must also be aware of the tax benefits and incentives for adopting sustainable practices. With environmental issues high on the global agenda, governments are targeting businesses in their drive to sustainability. Environmental taxes encourage SMEs to operate in a more environmentally friendly manner, such as reliefs from the UK government for buying energy-efficient technology for your business.
Sustainable finance options can help SMEs access capital to invest in sustainable initiatives that lead to significant cost savings and efficiency gains – such as:
The modern consumer, who is increasingly conscious of environmental and social issues, prefers to support businesses that align with their values. By integrating sustainability into their operations and culture, SMEs can engender a positive reputation that appeals to this ethically motivated bunch.
Sustainable finance provides the foundation needed to build a positive brand image around environmental and social responsibility. Invest wisely and they will appear more trustworthy and attractive to not only customers but employees and stakeholders as well. This fosters a strong reputation that can lead to increased customer loyalty, reduced marketing costs, and a competitive edge.
The growing demand for sustainable products and services amid a stark realisation of the impact we are having on the planet is reflected in a recent study around Gen Z and sustainability: the report reveals that 62% of Gen Z shoppers prefer to buy from sustainable brands, and a staggering 73% are willing to pay more for sustainable products.
Sustainable finance can help align investment decisions with consumer preferences by promoting ethical investments and sustainable products and services. Proactive SMEs can use this funding to tap into this eco-conscious sentiment, opening the door to new customer segments and revenue streams. To be successful, they must harness the power of sustainable finance to integrate ESG considerations as a core driver of their strategy and differentiate themselves from a sustainability perspective.
Sustainability focuses on minimising negative environmental impacts, such as pollution, resource depletion, and climate change. By integrating sustainability principles into their operations, SMEs can identify potential environmental risks, assess their impacts, and develop strategies to mitigate them. This proactive approach helps mitigate environmental incidents that could result in financial penalties, legal liabilities, reputational damage, and regulatory non-compliance.
Sustainable finance encourages SMEs to assess and disclose environmental risks in their portfolios. By integrating environmental risk analysis into their decision-making processes, they can identify and manage potential vulnerabilities, strengthening their resilience against disruptions.
By channelling capital towards eco-friendly projects and initiatives – such as renewable energy, energy efficiency, and climate-resilient infrastructure – sustainable finance helps future-proof SMEs by providing them with the agility to adapt to changing market dynamics.
Tackling the climate crisis and working towards a net zero economy by 2050 might be increasingly pressing issues – but they come at a financial cost. To be successful, sustainability initiatives require sufficient funding – something SMEs typically struggle with. According to our 2022 survey commissioned with YouGov, 15% of SMEs say rejection is one of their biggest funding concerns. Sustainable grants, loans and programmes allow SMEs to bypass their bank and obtain the initial investment required to kickstart these initiatives.
With the finances secured, SMEs can dedicate resources to implementing environmentally responsible strategies and integrating sustainability into their business practices. This firm financial footing ensures their core function won’t be disrupted and potential resistance from stakeholders is allayed.
SMEs are responsible for around 50% of all greenhouse gas emissions from the UK business sector. Against this troubling backdrop, they must understand why they need to adopt sustainability initiatives and how they go about it. When it comes to the all-important how sustainable finance can mean the difference between these vital plans remaining nice ideas and getting off the ground. Crucially, it typically removes interaction with a legacy bank from the lending process, which have a poor track record when it comes to funding SMEs.
The adoption of sustainable practices must not be a box-ticking exercise; they must be underpinned by an understanding of environmental issues and a genuine commitment to drive meaningful change – otherwise, they will remain rudderless. Get this right and SMEs can reduce operational costs, attract new customers, improve brand loyalty, and create new revenue streams – benefits that are born out of initiatives that appeal to the current environmental zeitgeist.
Sustainable finance is moving from niche to mainstream as more SMEs recognise the importance of integrating ESG factors into their strategy and decision-making. This is being accelerated by governments and regulatory bodies, which are increasingly taking steps to implement frameworks to promote sustainable finance – including mandatory ESG reporting requirements, tax incentives for sustainable investments, and regulations that encourage transparency and accountability.
Welcome to June, a month filled with joy, acceptance, and Pride! In honour of Pride Month, we’re dedicating some time to shed light on important aspects of this annual celebration.
Firstly, you may wonder: Why do we commemorate Pride Month?
Pride Month serves as a global beacon, casting a spotlight on the LGBTQIA+ community, their struggles, achievements, and aspirations. While there have been monumental strides in the advancement of gay rights, many regions around the world still enforce anti-LGBTQIA+ laws, putting severe restrictions on individual identity and freedom. For instance, on May 29, a Ugandan law criminalising homosexuality, punishable by life imprisonment, was enacted. Today, being a member of the LGBTQIA+ community remains illegal in 64 countries, a grim reminder of the battles yet to be won.
Learn more: Explore Countries where LGBTQIA+ rights are at risk
One question that might arise is: Why doesn’t Liberis change its logo to the Pride flag in June like other organizations?
This practice, commonly referred to as Rainbow washing, involves a company expressing support for the LGBTQIA+ community by incorporating rainbow colours into their branding. However, the trouble with Rainbow washing is that it can be an empty symbol without genuine, concrete support for the LGBTQIA+ community. This performative act may seem as self-congratulatory rather than driving real change or offering true support to the community it purports to stand with. The vibrancy of the rainbow colours might attract attention for the month of June, but by the 1st of July, all is reverted back to ‘business as usual’.
Learn More: The Problem with Rainbow Washing
Another thought that might occur to you: What exactly does LGBTQIA+ stand for?
Here’s a historical tidbit – The ‘L’ in the acronym is placed first to pay homage to the efforts of the lesbian community during the 1980s HIV/AIDS pandemic. At a time when many, including medical personnel, shunned those afflicted with the disease, it was lesbians who showed up to hospitals and homes, providing care and companionship to the ailing. They ensured no one felt alone in their fight. The order of the acronym serves as a tribute to those who demonstrated empathy and compassion when others wouldn’t.
Learn more: Discover the Full Meaning of the LGBTQIA+ Acronym
We encourage you to adopt gender-neutral terms, promoting inclusivity and respect.
Learn more: Everyday Gender-Neutral Language Tips
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