Paweł Stach, LeaseTech Product Owner

Reading time: 7 min

With online sales on the rise, growing by several percentage points a year in Europe, the B2B sector (accounting for 40% of transactions) is emerging as an exciting growth area for leasing companies. These institutions, a mainstay of corporate financing, may find financing online purchases of fixed assets and equipment a “tasty morsel” to increase their market advantage. It is also an opportunity to transform leasing services and innovate in financing.

Leasing in B2B e-commerce

Leasing, a traditional pillar of business support, is gaining a new face in the online environment. The tax advantages that leasing brings, such as the full inclusion of installments in costs and the ability to deduct VAT, invariably make it an attractive option for companies. However, in the European e-commerce landscape, only a few leasing companies have stepped forward, adapting their services to the e-commerce needs. The space for competition seems quite evident, especially with the high margins applied by the early players. So, what is the barrier to entry for new players?

Challenges in the combination of leasing and B2B e-commerce

The implementation of leasing in online shopping faces several challenges. The first is the structure of B2B e-commerce market players. It is difficult to estimate the number of entities selling online items classified as fixed assets or equipment nor the turnover value of this type of assortment. The e-commerce market is mostly trading in low-value goods.

Another challenge is the leading e-commerce platforms that control the markets. Convincing them to cooperate with leasing companies in the area of financing takes work. If an agreement is reached, these platforms often impose strict conditions and rules for cooperation. Adapting to these conditions requires flexibility and the ability to react quickly to changing rules, which can be challenging for many leasing companies, significantly if these regulations affect margins and pricing models.

The technology integration aspect is not without problems either. Integrating online stores with leasing companies’ systems is a multifaceted, costly, and organizationally challenging undertaking. Convincing e-commerce stores to integrate with a particular leasing company can be complex, especially if specific entities are already working with another financing provider. Therefore, leasing companies must be willing to invest in systems compatible with a diverse e-commerce architecture, which involves a lengthy process and constant updates.

Internal changes in leasing companies are also mandatory. The transition to the e-commerce market requires a strategic decision and investment. Dedicated teams and processes must be created to handle new sales channels and provide customer support online. This, in turn, requires investment in training, recruiting the right talent, and developing technology.

Leasing and e-commerce can benefit each other

Integrating leasing services with online stores in B2B transactions could be a breakthrough for leasing companies that wish to enter this business area, bringing many benefits. By opening a new distribution channel, leasing companies can, first and foremost, look forward to increased turnover. The automated nature of this channel promises not only improved sales but also higher profitability.

Through integrations with e-commerce platforms, leasing companies can attract new suppliers and offer them not only financing services for their customers but also comprehensive financial services that support suppliers’ business growth.

Leasing companies in the e-commerce industry are also reacting to the evolving expectations of their regular suppliers. With businesses shifting to the digital space, suppliers expect their financing partners to adapt their processes to support online services. Such adaptation not only strengthens relationships with existing partners but also serves as the market differentiator, underscoring the leasing company’s willingness to support the continued growth and digitization of B2B commerce.

Generational changes in customer behavior and expectations must be addressed too. The younger generation of entrepreneurs is looking for fast, convenient, and easily accessible financial services, such as leasing, available remotely. Companies that adapt to these trends will ensure their long-term survival in the market, while those that delay the transition may find themselves in a difficult position.

“Radiating” innovation is another advantage. Combining leasing with e-commerce requires leasing companies to undertake technological changes that often mean faster, more automated and more efficient leasing software solutions. These projects, using advanced technologies such as ML/AI, have the potential to impact the entire organization. They develop competencies, introduce new technologies, and boost team morale, which can inspire further innovation.

Last but not least, the benefit is increased brand awareness. An online store presence can significantly raise a leasing company’s brand recognition, which is invaluable in building trust and expanding the customer base.

In conclusion, implementing embedded finance leasing in e-commerce is not only a forward-looking strategy but also a necessity for leasing companies that want to be leaders in the modern digital financial landscape.

Automotive sector at the forefront of transformation

A slightly different context is the automotive sector. Two in-sync phenomena can be seen here. The first is that some automotive corporations are getting firmly into the zone of selling their vehicles online. There is a natural synergy with captive companies, where vehicle financing in the form of leasing or long-term rental becomes an integral part of configuring and ordering a vehicle online process. The second phenomenon is the rash of automotive marketplace portals, independent of brand manufacturers, offering both new and used vehicles. It has also been observed among leasing companies that have launched their own portals of this kind.

In both cases, it is clear that leasing processes have not yet reached their optimum in terms of simplicity and convenience. The presence of the ‘ask an advisor’ buttons is a sign that there is much work to be done here in automation and the full self-service area.

The role of AI and innovation in the future of B2B finance

Artificial intelligence and technological innovation could be the key to the future development of B2B financing in e-commerce. Innovative startups using new technologies could not only shake up the market but also define new standards in terms of speed, convenience, and availability of financing for businesses.

Will we see this happening? It’s hard to predict, but embedded finance is a likely area where it could happen. The banking industry has already undergone this type of upheaval where breaking with old business models and technological limitations has benefited both customers and the sector as a whole.

Time to take action!

The future of B2B financing in e-commerce is painted in optimistic colors of intense digitization and automation. While the current landscape indicates a reluctance and selective involvement of leasing companies online, the dynamic development of technology and the changing behavior of business consumers will force faster change.

By monitoring emerging trends, especially those driven by AI, leasing companies can participate in and shape this change by introducing new business models that make the financing process faster, easier, and more accessible to all market participants.

Ailleron - Challenges and prospects for leasing as embedded finance in e-commerce

Paweł Stach LeaseTech Product Owner

Expert currently specializing in the design and implementation of IT solutions for the leasing industry but also with experience from the banking sector. He has expertise in areas such as e-commerce, product management, business analysis, enterprise architecture, and UX.

abstract lines

Let’s make financial experiences
easy and enjoyable together!

Tell us what you need and we will contact you shortly.

Tell us what you need and we will contact you shortly.