Transacting on credit has been an integral part of how businesses operate for decades. A close look at any SME from around the world reveals the same pattern – businesses stock their inventory on credit from the retailers and generally start repayment in 15 to 30 days.
For big corporates, the equation is slightly different – most enterprises process their supplier’s invoice 90 to 120 days post accepting delivery of orders. However, while this informal practice of transacting on credit has been normalized, it arrives with several shortcomings for both the seller and buyer.
B2B BNPL aims to fix that and thus holds the means of revolutionizing B2B commerce and payments for the better. In this blog post, we will examine how.
But First, What is B2B BNPL?
BNPL or Buy Now Pay Later is a type of financing wherein the lender pays the merchant the total invoice amount upfront and offers the customer a monthly repayment plan via instalments to payback the same. In most cases, the lender or the financier doesn’t charge the buyer an interest amount unless the buyer misses a repayment date, post which late fees and high-interest rates are charged.
Over the past 5 years, BNPL has taken the world of B2C commerce by storm, and now it is slowly entering the B2B domain. One distinct difference between BNPL for B2C and B2B lies in how the transaction is processed and also the ticket size of the loans.
Why is BNPL Revolutionary for B2B Commerce?
Now that we have a fair understanding of B2B BNPL, let’s take a closer look at why it has the potential to change how businesses from around the globe transact with each other.
1. Decreased Administrative Costs
Although transacting on credit has existed in the business world for quite some time, one of its biggest downsides is the added burden for sellers. As in most cases, the seller or retailer underwrites the credit for the buyer they incur administrative costs in the form of credit checks, late repayments and more. Thus, by outsourcing to a specialized BNPL lender, the seller can save their additional overheads along with increasing their margin on individual transactions.
2. Improved Checkout Experience
In an informal setting, both the buyer and seller have to undergo a time-consuming approval and underwriting process, which degrades the checkout experience. By leveraging advanced technology, sellers can delight customers by digitizing the entire customer journey and also improve sales by reducing resistance and facilitating quicker checkouts.
3. Expert Risk Management
Underwriting loans without robust credit rule engines and real-time credit checks add to the seller’s risk in terms of frequent late repayments and high chances of default. Thus, by partnering with a specialized lender, the seller can take advantage of the lender’s advanced rule engine, which takes multiple data points into account, along with performing daily credit checks. This will help the seller expertly manage their risk as well as facilitate quicker underwritings for new as well as seasoned buyers.
4. Increased Cart Size
A common struggle of retailers across the globe is to efficiently increase their customer’s order size to boost profits. However, as profit margins are thin, retailers often lack the leverage to expand their customer’s purchasing ability. Introducing hassle-free credit facilities in the form of B2B BNPL can solve this problem by increasing the average order volume of customers and thus creating a sustainable growth option for sellers.
5. Delightful Customer Experience
Last but not least, the latest survey of SMEs highlighted how B2B customers often have high regard for user experience. However, to date, most applications for business customers have made functionality their priority, contributing to an unsatisfactory customer experience. By introducing B2B BNPL, sellers and retailers can offer customers a delightful experience by facilitating a seamless financing and checkout experience. This will not only increase the customer’s brand loyalty but also significantly boost the lifetime value of the seller.
Challenges Need to be Overcome
While the opportunity for B2B BNPL to make a change for the better is certain, there are certain challenges stakeholders need to overcome to capture the emerging market.
For instance, most countries lack a unified and central credit check facility and repository for businesses. Added to this, as most credit bureaus have strict eligibility criteria, often small businesses are left out. A feasible solution to this challenge is to introduce a nationwide reporting system such that businesses can share this data with lenders to assess their eligibility. Although a few countries like India and Singapore have introduced this in the form of their GST reporting system, others need to adapt this to make B2B BNPL go global.
Lastly, although individual parts of a business’s inventory restocking and order supply chain are digitized, it needs to be further improved such that both merchants and sellers can take advantage of a seamless financing and checkout experience.
The Way Forward
The B2B payments industry is expected to grow at a 10.8% CAGR over the next decade and surpass USD 2515 billion in valuation by 2030, as per findings by Straits Research. This metric alone displays the potential this revolutionary technology holds for the future and how it can ease the transaction and payment experience for millions of businesses worldwide, both big and small.
B2B BNPL is the future of business payments and CrediLinq is here to help you kickstart your journey. By partnering with us, you can offer all your customers a seamless financing experience at checkout and as a result improve your customer’s loyalty towards your platform and significantly boost your average order value and revenue. Excited to know more? Get in touch with us today.
