How B2B firms monetize timing and working capital

Selling Timing, Not Goods

How Indian B2B Firms Are Monetizing Timing and Working Capital: The Latest Developments and Strategic Implications

India’s B2B ecosystem is undergoing a profound transformation, driven by innovative financial strategies that are shifting the paradigm from traditional product sales to embedded, ecosystem-based revenue models. Leading firms are increasingly integrating a broad spectrum of financial services—such as credit, payments, and supply chain financing—directly into operational workflows. This financialization of supply chains is unlocking new revenue streams, deepening customer engagement, improving unit economics, and addressing systemic credit gaps faced by MSMEs (Micro, Small, and Medium Enterprises). Recent technological advances, regulatory reforms, macroeconomic shifts, and strategic initiatives are accelerating this trend, positioning Indian B2B companies at the forefront of a revolution in embedded finance.

The Core Shift: From Transactional Sales to Embedded Financial Ecosystems

Traditionally, Indian B2B firms relied heavily on product margins and transaction fees. Today, companies like OfBusiness exemplify a paradigm shift—moving from mere supply chain facilitators to comprehensive financial ecosystem providers. They are building end-to-end platforms that monetize inherent timing mismatches in procurement, manufacturing, and sales cycles, effectively turning working capital and timing advantages into revenue opportunities.

Key Components of This Financialization

Dynamic Credit & Inventory Financing:
Firms are offering flexible, need-based credit lines and inventory loans tailored to MSMEs’ cash flows. This enables businesses to maintain optimal stock levels without upfront capital, reducing shortages and boosting operational agility.
Payables & Receivables Optimization:
By streamlining cash flow cycles, these companies minimize working capital gaps, facilitating faster procurement, inventory turnover, and cost efficiencies. These efficiencies generate recurring revenue through financing fees, interest, and transaction charges.
Ecosystem Coordination:
Acting as central hubs, these firms connect manufacturers, suppliers, financiers, and other stakeholders, reducing transaction frictions and synchronizing demand-supply dynamics within a unified financial-supply chain interface.

This embedded approach stabilizes revenues, improves margins, and most critically, deepens customer engagement. MSMEs increasingly depend on these integrated solutions, creating a resilient, interconnected ecosystem that benefits all parties involved.

Addressing the MSME Credit Gap: A Massive Market Opportunity

India’s MSME sector comprises over 90% of enterprises and contributes roughly 30% of GDP. Despite its significance, MSMEs remain severely underserved by traditional lenders due to lack of collateral, high default risks, and bureaucratic delays. This credit gap hampers growth, limits operational resilience, and constrains scaling.

Strategic Responses from Firms

Supply Chain Embedded Financing:
Companies like OfBusiness are bridging this gap by integrating financial solutions directly into supply chain activities, such as just-in-time procurement, inventory management, and cash flow smoothing.
Empowerment and Inclusion:
These innovations enable MSMEs to scale sustainably, reduce dependence on costly informal credit, and enhance competitiveness—fostering broader economic growth and financial inclusion.

Technological and Regulatory Enablers: Powering the Transformation

Fintech & AI-Driven Underwriting

A critical enabler is the adoption of advanced technology:

Artificial Intelligence (AI) and Data Analytics:
Firms deploy sector-specific, AI-powered underwriting models that refine credit scoring, detect fraud, and predict default risks. Experts emphasize that "AI goes vertical," meaning models are tailored to specific sectors, leading to more accurate risk assessment and lower default rates.
RegTech & Compliance:
To navigate complex regulatory environments, firms utilize RegTech tools that automate reporting, monitor compliance, and manage risk, ensuring scalable and sustainable operations.

Geopolitical and Regulatory Dynamics

Recent developments highlight strategic emphasis on innovation and compliance:

Partnerships and Investments:
Notable examples include Paytm’s Rs 1,500 crore investment into Vijay Shekhar Sharma’s fintech ventures via Zomato, illustrating how ecosystem alliances expand reach amid regulatory considerations.
Deep-Tech Startup Rules:
India’s new regulations for deep-tech startups are catalyzing sector-specific AI, RegTech, and fintech innovations, reducing bureaucratic hurdles and accelerating ecosystem development. These reforms foster an environment where AI-driven underwriting and embedded finance models can scale rapidly.

Policy Signals: Budget 2026 and Macro Stability

The Union Budget 2026 emphasizes digital payments, financial inclusion, and credit facilitation—reflecting government support for fintech expansion. Additionally, the Reserve Bank of India (RBI) recently kept the repo rate unchanged, supporting liquidity and macroeconomic stability. Such macroeconomic signals encourage continued growth of embedded finance solutions, even amid global uncertainties.

The Payment Infrastructure Revolution: UPI and Beyond

India is revolutionizing its payments infrastructure:

"India wants to make credit and debit cards obsolete for payments."

The widespread adoption of UPI (Unified Payments Interface) and real-time payment rails aims to reduce reliance on traditional card payments, lower transaction costs, and speed up settlements. This embedded payments ecosystem significantly benefits B2B fintech players by integrating instant payments into supply chain workflows.

Key Implications:

Cost Efficiency:
Reduced transaction fees for B2B firms and MSMEs.
Faster Payments:
Enhanced speed and security in supply chain finance.
Wider Adoption:
Increased use of digital wallets and UPI-based solutions in B2B transactions.

Latest Developments: UPI-Based Credit Solutions and the Rise of CLOU

A groundbreaking development is the emergence of UPI-based credit solutions, especially Credit Lines on UPI (CLOU). These facilitate instant, small-ticket credit directly linked to UPI accounts, disrupting traditional micro-lending methods.

Key Features of CLOU:

No Re-issuance or Replacement Costs:
Unlike physical credit cards, CLOU eliminates the need for physical infrastructure, significantly reducing operational costs.
No POS-Linked Rewards or Infrastructure:
CLOU does not depend on POS systems, making it cost-effective and easy to deploy.
Seamless Integration:
Enables instant credit approval and disbursal within existing UPI payment flows, embedded directly into daily transactions.

This disintermediation of micro-lending reduces reliance on expensive credit sources, cuts operational overhead, and further embeds credit access into supply chain activities. Firms leveraging CLOU can offer flexible credit lines that displace microfinance or informal lending, streamlining cash flow management for MSMEs.

Sector-Specific AI and Ecosystem-Driven Innovation

The India AI Impact Summit recently highlighted the accelerating role of sector-specific AI applications:

Emphasizing verticalized AI models for credit underwriting.
Showcasing innovations from deep-tech startups in RegTech and fintech.
Discussing ecosystem collaborations to drive financial inclusion.

This summit underscores a government and industry-driven push toward deep-tech embedded finance solutions, reinforcing the strategic importance of AI in risk management, fraud detection, and supply chain optimization.

The Rise of Cross-Border B2B Payments: Xflow and International Expansion

Adding a new dimension to India’s embedded finance landscape is the emergence of cross-border B2B payment solutions. Recently, Stripe and PayPal Ventures invested in Xflow, an Indian fintech startup focused on streamlining international trade payments.

Significance of Xflow:

Addressing Cross-Border Frictions:
Traditional cross-border payments are hampered by high costs, delays, and complex compliance. Xflow leverages digital infrastructure to reduce transaction times and costs, facilitating smoother international supply chains.
Integration with Domestic Platforms:
Xflow’s solutions are designed to integrate seamlessly with Indian B2B fintech ecosystems, enabling instant settlements and cost-effective currency conversions.
Potential to Scale Embedded Finance Globally:
By building robust cross-border payment capabilities, Xflow positions Indian B2B firms to expand their embedded finance services internationally, supporting global supply chain networks.

This international expansion signals a maturing of India’s embedded finance sector, with cross-border solutions becoming an essential component of globalized supply chains.

Practical Insights: Why Are So Many Business Loans Rejected in India?

While innovative financing solutions are unfolding rapidly, a persistent challenge remains: the high rejection rate of business loan applications. Industry insights indicate that up to 90% of business loan applications are denied, often due to:

Lack of Collateral:
MSMEs frequently lack tangible assets to secure loans.
Poor Credit Histories:
Many MSMEs have limited or no credit history, making risk assessment difficult.
Inaccurate or Insufficient Documentation:
Small businesses often struggle with formal documentation, leading to rejection.
High Default Risks:
Lenders perceive MSMEs as inherently riskier, especially without detailed financials.

Practical example:
In a recent video by Loan Doctor, the reasons for rejection were highlighted, emphasizing that lack of formal credit history and collateral issues are primary barriers. This persistent rejection gap underscores the huge opportunity for embedded finance solutions—which can offer alternative risk assessments, dynamic credit lines, and real-time underwriting—to fill this financing void.

Risks, Challenges, and Mitigation Strategies

Despite the promising outlook, firms must navigate several risks:

Credit Defaults & Fraud:
Addressed through AI-powered risk models, sector-specific analytics, and robust fraud detection systems.
Market Volatility:
Requires real-time, adaptive risk assessment frameworks to respond to macroeconomic shifts.
Regulatory Scrutiny:
Increasing oversight may raise compliance costs, necessitating agile internal controls and proactive regulator engagement.
Intensifying Competition:
Success attracts new entrants; differentiation through technology, customer experience, and ecosystem orchestration is essential.

Mitigation Measures

Implement comprehensive risk management frameworks.
Leverage granular, AI-driven credit scoring.
Maintain agile compliance processes and diversify funding sources.

Current Status and Future Outlook

Today, OfBusiness’s valuation exceeds ₹19,000 crore, exemplifying investor confidence in embedded finance models. The company is expanding into new sectors, integrating AI-based credit solutions, and deepening its ecosystem—solidifying its leadership position.

Future Trajectory:

Sector-specific AI tools will enhance underwriting accuracy, reduce defaults, and improve customer satisfaction.
Regulatory support, driven by deep-tech rules and government initiatives, will foster responsible innovation.
Deeper integration of UPI, CLOU, and real-time payments will embed finance into supply chains, encouraging sustainable, scalable growth.

Recent Market Insights: Liquidity & Debt Market Dynamics

Adding momentum to India’s embedded finance landscape is the transformation in debt markets. Vijay Chandok, CEO of Bond Street, notes that retail investors are increasingly engaging in debt instruments, providing new liquidity channels for fintechs and MSMEs. The growth of retail bonds and digital debt instruments creates a more resilient and inclusive debt ecosystem, vital for scaling embedded finance solutions.

This liquidity infusion supports more flexible, affordable credit options, enabling fintechs and supply chain financiers to expand offerings while managing risks prudently.

Evolving Payment Policies and Bank Strategies

Major banks like SBI, HDFC, and ICICI are restructuring reward policies on credit cards, as reported by The Economic Times. They are reducing or reconfiguring reward programs to control costs amid a competitive landscape and increased regulatory oversight. This strategic shift diminishes the attractiveness of traditional card rewards, indirectly promoting digital, real-time payment solutions like UPI.

This policy realignment aligns with the broader trend of making card payments less dominant and favoring embedded, instant payment ecosystems, which fuel the growth of embedded finance models in B2B contexts.

Implications and Final Remarks

India’s B2B landscape is at a pivotal crossroads, with firms actively monetizing timing mismatches and working capital through embedded financial ecosystems. Companies like OfBusiness are leading this transformation, leveraging fintech innovations, AI-driven underwriting, and seamless payment integrations to turn supply chains into profitable, resilient engines of growth.

Recent developments, including the Rs 20,000 crore investment in Airtel Money aimed at competing with Jio Financial, illustrate how large corporates are deploying substantial capital to capture a significant share of the embedded finance market, further accelerating the ecosystem.

This new paradigm hinges on:

Advanced risk management and sector-specific AI models.
Regulatory agility and government support.
Deep integration of UPI, CLOU, and real-time payments.

If these elements converge effectively, financialization will not only improve unit economics but also foster inclusive, sustainable growth, empowering MSMEs and positioning India as a global hub for embedded B2B finance solutions. The recent surge in cross-border payment innovations and retail debt participation further underscores India’s potential to evolve into a leader in global embedded finance.

As the ecosystem matures, the key challenge will be balancing innovation with risk management, ensuring that the rapid growth remains sustainable and inclusive. The ongoing regulatory reforms, technological advancements, and strategic investments suggest that Indian firms are well-positioned to capitalize on this transformative wave in the coming years.

Sources (8)

Updated Feb 26, 2026

India Business Nexus