However, we believe the report is mistaken in its suggestion that PayTech is a new category. Instead, at Hokodo we would argue that PayTech has been around for years. Take PayPal, for example, the first version of which was launched back in 1999. What’s actually ‘new’ is the rising adoption of paytech in B2B, a sector which has been critically underserved by digital payments providers until very recently.
Let’s take a deeper dive into one of the seven forces identified in EY’s report, Buy Now, Pay Later (BNPL):
“While BNPL was initially used for lower-cost fashion purchases, its application has expanded. BNPL is now being offered in corporate purchasing and non-discretionary purchases, such as healthcare, legal services and auto repairs. Nonetheless, the BNPL model will need to evolve to deliver sustained profitability given the rising cost of capital and increased regulatory scrutiny.”
Indeed, the road ahead for BNPL is unclear – particularly so for firms like Klarna and Afterpay which lend to consumers. As the report suggests, BNPL providers will need to address responsible lending, using additional data sources for credit decisioning and offering their customers financial management tools if they are to succeed in the future.
However, another challenge for BNPL providers (and other PayTechs) is working out how to provide ‘value beyond payments’. As an increasing number of payments players look beyond transactions and consider the holistic customer experience, BNPL providers must follow suit if they are to remain competitive.
Buy Now, Pay Later providers have two customers. The first customer is the merchant, marketplace or other e-commerce platform into which the BNPL solution is integrated. The second customer is the end user; the buyer who chooses to defer payment of their purchase.
BNPL providers can provide value beyond payments for both these customers by fostering an ecosystem of adjacent companies like payment service providers (PSPs) and marketplace software platforms.
“A robust partnerships strategy helps BNPL firms like Hokodo to connect and combine their services with various other payment providers,” says Raphaël Caruso, Hokodo’s Director of Strategic Projects and Partnerships. “Merchants benefit from an integrated service and reduced admin, while buyers are offered a frictionless user journey and embedded financial products at exactly the right time.”
Ultimately, the partnerships between BNPL providers and other PayTechs should have one key goal: to stimulate growth and success for the merchants and marketplaces they serve.
"Hokodo and Lemonway are both focused on supporting B2B marketplace operators to achieve scale and grow globally,” says Maxime Imbert, who leads the Strategic Alliances team at marketplace payments specialist firm Lemonway. “Through our partnership, we are delivering the best B2B payment experience by financing sellers, managing flows and helping Marketplace operators to grow their GMV.”
There is a significant opportunity now for BNPL firms, embedded financial services providers and other PayTechs to innovate and transform online B2B payments in a way that brings new value to buyers and sellers alike, replicating recent success and developments in B2C e-commerce.
Find out more about Hokodo’s partnerships strategy.