B2B Buy Now, Pay Later vs B2C: The key differences


Buy Now, Pay Later (BNPL) has become incredibly popular in the consumer space over the past few years. By choosing providers like Klarna or Affirm at checkout, online buyers are able to delay or split payments for items they need or want, but cannot yet afford. The convenience and flexibility of this solution has led to rapid growth and bullish projections for the BNPL market: in  the US alone, it is expected to reach US$9.20 billion by 2030, growing at the impressive rate of 24.3% per year from 2023 to 2030. Globally, the BNPL market could reach US$3 trillion by 2030.

With the COVID-19 pandemic and the subsequent shift of B2B commerce to online platforms, this trend recently began to spread to the business world. BNPL has the same purpose in B2B as in B2C: allowing buyers to defer payments to give them more purchasing power. However, there are several key differences between the two solutions, which this article explores in detail.

BNPL for B2B commerce

For consumers, BNPL effectively offers a low-cost alternative to credit cards, which have lost popularity over the years due to their high interest rates and late payment fees. But in the business world, BNPL is arguably replacing a much more complex solution that has supported commerce for centuries: trade credit. 

Trade credit refers to the deferral of payment for B2B orders, with credit offered by the seller company itself or a financial provider. It is estimated that up to 90% of global trade relies on trade credit, so it is fair to say companies are used to — and even expect — this type of solution to support their transactions. 

But most trade credit solutions are as old as trade itself, meaning they are cumbersome and heavily paper-based. Now, B2B transactions are being conducted online by millennial and gen Z buyers who expect the same seamless customer experience they get in their personal lives: trade credit is ripe for the kind of digital disruption BNPL offers. 

Currently, it is nearly impossible to arrange credit terms for online B2B payments. In most cases, buyers need to fill out a lengthy application form and wait for a credit review that involves web searches and reference calls. As intermediaries, B2B e-commerce platforms are forced to orchestrate these third-party transactions manually, managing limits and chasing payment over the phone. This inefficiency is affecting both buyers and sellers, leading to many lost opportunities.

BNPL revolutionises trade credit by making it 100% digital: credit checks happen in a matter of seconds, transactions become smooth and efficient and as a result, financing costs are reduced dramatically. 

Differences in scope

Globally, over US$30 trillion of B2B sales take place on credit terms every year. This means that the B2B BNPL market opportunity today is already 10 times bigger than the 2030 projection for the B2C market. It also explains why B2C providers like Klarna or Clearpay cannot cater for B2B transactions. 

Klarna’s Average Order Value (AOV) is around US$150, whereas B2B sales are estimated to be seven times larger on average. Credit limits in B2B BNPL must be substantially higher than in B2C, increasing non-payment risk and the need for thorough credit checks. 

“The B2B BNPL market opportunity today is already 10 times bigger than the 2030 projection for the B2C market.”

Additionally, consumers tend to make purchase decisions alone and are more likely to buy on an impulse — the type of ‘treat yourself’ purchase BNPL providers incentivise. In contrast, businesses have entire procurement departments dedicated to planning purchases and lowering their costs as much as possible. Purchase approval is also more complex in companies, often having to go through several layers of management. 

These differences make B2B BNPL more complex than its B2C counterpart: providers need to allow for communication between several stakeholders, analyse and underwrite credit efficiently while protecting themselves and their customers against fraud and non-payment risk. And because transaction values are higher, any miscalculation can be very costly. 

Due diligence in B2B vs B2C BNPL

Due to this added complexity, due diligence takes on a whole new meaning in B2B BNPL. While in the consumer space, BNPL onboarding requires no document uploading and can even be done without any credit assessment, B2B financing abides by different rules.

In traditional trade credit, credit and fraud checks are done by credit and compliance analysts, who carry out online research, check financial records and conduct reference calls to ensure that new clients are exactly who they say they are, and that they will be able to repay the credit extended to them. 

On e-commerce platforms, procurement managers hoping to buy now and pay later expect to be approved instantly, just as they are when shopping as consumers. This is forcing the trade credit market towards digitisation and modernisation. Digital-first B2B BNPL providers support online merchants through credit checks, reconciliations, collections and protection against bad debt, and with an automated due diligence process that delivers client approval in a matter of seconds. This agility increases conversion rates by an average of 40% in B2B commerce — almost double the increase observed in B2C.

How can businesses offer BNPL to B2B buyers?

Despite the higher complexity of offering Buy Now, Pay Later services for businesses, specialised providers have emerged to fill this gap. But in this nascent market, it can be difficult for companies to choose the right BNPL solution for their business. The key is to look for tech-driven partners that can integrate BNPL payments seamlessly into companies’ online checkout process.

Hokodo is a digital trade credit solution with a proprietary API that can be integrated into any B2B e-commerce platform. Buyers are given the option to defer payment of their purchase, while sellers are paid up front. Hokodo runs all credit scoring and fraud detection checks and provides payments, collections, financing and credit insurance to guarantee that sellers receive 100% of the money they are owed. 

Book a demo today to find out how it works.

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