-Buy-now-pay-later: It’s the global fintech revolution enabling shoppers to pay for everyday products in installments, and arguably marks the greatest disruption in consumer finance since credit cards. Services such as Afterpay, Affirm, and Klarna are soaring in popularity and valuation
-A growing number of fintech-based finance providers are now working to replicate the booming B2C BNPL model in the B2B world, by proactively providing credit to B2B merchants. One estimate puts the percentage of B2B as between 14% (2020) and 17% (2023) of all e-commerce in the U.S.
-B2B payments, when compared with B2C, are positively archaic. The time suppliers wait to be paid for invoices they are owed is the perfect illustration of this.
-In the B2B business, the buyer is a corporate. The default process is typically a “credit” transaction, meaning corporates almost always buy now, pay later – with payment terms of up to 30, 60, 90 or 120 + days. Why is that?
Firstly, BNPL is seen by corporates to give them a financial advantage, enabling them to hold on to cash (working capital). Secondly, it gives them the chance to check that the goods and services are acceptable (process).
-Sellers in B2B would love to have the option of an instant “cash transaction”. With the technology now available, it is straightforward to facilitate a “sell now, paid now” (SNPN) option, without impacting the two reasons why Buyers insist on BNPL (working capital and process).
-SNPN solutions can be financially beneficial to both sellers and corporate buyers.
– Two key factors, in particular – that has led to the rise of B2B BNPL:
-The first factor is the maturing of financial technologies that makes B2B BNPL possible. Previously, when providing credit, businesses would have to undertake arduous, manual and generally offline checks. Today, digital solutions –open banking allow a fast and accurate credit checks and automated KYC and AML – streamline the entire process, meaning lending decisions can be made in minutes.
-The second factor that has accelerated the development of B2B BNPL has been the economic impact of the pandemic. The squeezing of finances – particularly for SMEs – has resulted in pressure on cash flow.
-With BNPL having revolutionised consumer finance in recent years, business finance is now set to undertake a similar transformation.