Trade Credit

TL;DR: Demonstrating the business case for Digital Trade Credit


Our white paper exploring the ROI of Digital Trade Credit is packed with information and insights that you won’t find anywhere else. It explores in great detail how such a solution helps B2B sellers to save money and drive more revenue.

But we get it. Not everyone has the time to read a 35-page white paper. Especially time-poor B2B business owners who are laser-focused on achieving their growth goals. So, we tasked our editorial team with creating a shortened version of the white paper, highlighting all the most important information while keeping things under 1,300 words. 

A bit of background

In recent years much of B2B has moved online, but the same cannot be said of trade credit management. Merchants rely on traditional practices which are manual, costly and detrimental to growth. Traditional trade credit is reserved for a few large buyers, while SMEs don’t get the payment terms that they deserve. The paradox is that those who need credit most are the least likely to get it.

Digital Trade Credit solutions present a modern approach that brings a seamless user experience (UX) and customer-centric approach to B2B, drawing together a number of key processes such as credit management, financing, collections and insurance into one single solution.

Change in trade credit management is unavoidable for three key reasons.

  1. The workflows that underpin trade credit management were built for offline commerce and the process of managing trade credit accounts is extraordinarily painful.
  2. B2B buyers are increasingly happy to make large purchases online, with 77% happy to spend more than $50,000 in a single transaction online. Buyers also expect more from their online purchase experience.
  3. Traditional trade credit management presents a number of challenges to merchants. Namely, the manual labour of aggregating a range of solutions and providers and the increasing prevalence of fraud and credit risks within B2B.

There is a strong need for a new approach to trade credit management. The solution? Digital Trade Credit.

However, committing to a new investment is never easy and often B2B suppliers find it easier to carry on with the same processes rather than to go ahead with the perceived upheaval of change. 

To combat this way of thinking, let’s take a look at an overview of the benefits of Digital Trade Credit.

Benefit #1: The direct cost savings of Digital Trade Credit

The first tangible benefit is that Trade Credit draws together multiple processes currently undertaken by several teams using a variety of solutions and external providers. This enables merchants to achieve a number of direct cost savings across three broad categories.

The cost of buying payment and trade credit related services

Suppliers must either invest in solutions and services to support their operations or develop the appropriate capabilities and create the associated resources internally, which quickly becomes unsustainable.

Remember that each service also brings IT integration costs, which can run into hundreds of thousands of euros if an agency is required for the work. 

Services costs can be split into three categories: pre-trade, trade and post-trade.

Pre-trade costs:

  • Credit scoring
  • Fraud detection

Trade costs:

  • Payment processing fees from payment service providers and banks

Post-trade costs:

  • Accounts receivable solutions
  • Invoice factoring
  • Credit insurance
  • Collections agency fees

The cost of labour

Sellers also stand to make a number of associated labour and time costs that can be split into the same three categories as before: pre-trade, trade and post-trade.

Pre-trade costs include:

  • Credit assessments
  • Limits determination 

Trade costs include:

  • Integrating, testing and monitoring several payment options

Post-trade costs include:

  • Buyer monitoring
  • Limits management
  • Collections and reconciliations

Financial costs

Digital Trade Credit can significantly reduce financial costs, but businesses often do not factor these into cost assessments.

Financial costs include:

  • Credit losses
  • Fraudulent transactions
  • The cost of liquidity:
  • Working capital implications of offering terms
  • Large customers expect extended payment terms

To get a better idea of the cost savings you can expect from Digital Trade Credit, you can also use our cost of trade credit calculator. Try it out now.

Benefit #2: Digital Trade Credit drives additional revenue

Merchants that have implemented Digital Trade Credit report average revenue increases of 40%. All else being equal, offering better payment terms helps merchants to win more business. 

The ways that Digital Trade Credit drives additional revenue can be split into three broad categories.

1. Winning new clients

Digital Trade Credit helps B2B suppliers win new clients in two ways:

  • By strengthening the value proposition for new customers
  • By offering a more streamlined sales process

A stronger value proposition for new clients

B2B suppliers typically only offer payment terms to their largest customers. Satisfaction levels tend to be highest among these customers, which is reflected in more repeat orders and a higher average order volume and value. However, there is a long tail of  customers who can’t access credit. 

Digital Trade Credit empowers suppliers to offer instant credit decisions to a much larger pool of customers. Generally, it is possible to offer trade credit in 80% of cases with Digital Trade Credit, whereas with traditional approaches this is only the case for 10-20% of new customers. 

A more streamlined sales process

Simply put, coming back to clients faster helps to win deals. Digital Trade Credit shortens discussions between sales and finance teams and provides instant decisioning that enables customers to transact from day one. 

Additionally, rather than taking a blanket approach to all buyers in a target segment, suppliers can automate pre-checks of prospects, so that only those in good financial health are developed.

2. Increasing share of wallet

Offering better payment terms to high potential clients drives loyalty and helps a supplier to become the default choice. Buyers that use multiple suppliers tend to shift most of their business to those that have the best payment terms and buyer experience. Suppliers that use Digital Trade Credit report increased purchase frequency of 20% and an average contract value (ACV) uplift of 25%.

3. Providing a better brand experience

Digital trade credit helps B2B suppliers offer a better brand experience in two ways:

  • By helping to deliver a modern user experience (UX) 
  • By improving customer centricity

Helping to deliver a modern UX

B2B merchants are under pressure to provide a strong digital customer experience from start to finish. Implementing a Digital Trade Credit solution can help achieve a better UX, from making it easier to transact in the first instance, to offering trade credit terms and preferred payment options. 

Improving customer centricity

It is widely recognised that the customer centricity of B2B lags behind that of B2C, yet as B2B International finds, improving customer experience from average to exceptional can lead to increases in key performance indicators such as likelihood to renew or buy another product.

One of the best drivers of customer loyalty is to make it easy for customers to transact by removing any points of friction. Digital Trade Credit solutions make it easier to trade and provide a range of payment options, ultimately removing barriers for buyers.

Don’t just take our word for it

As part of our white paper, we sat down with Christophe Bertrand, Head of Payment, Payment Terms and Fraud at Ankorstore, to learn more about the decision to implement a Digital Trade Credit solution and the impact it has had on the business.

“Thanks to the strong benefits that deferred payments bring, retailers that use them are more loyal, more sticky,” Christophe explained. “On average, they spend more - total order values tend to increase with each transaction - and they transact more frequently. They also tend to expand their purchasing categories.”

You can read more about Ankorstore’s experience here.

Next steps

Want to find out more about how Digital Trade Credit could help to save money and drive revenue for your business? Chat with a payments specialist today.

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