It’s no secret that Buy Now, Pay Later (BNPL) has taken off like a rocket within consumer commerce in recent years. In 2023, it’s a challenge to find a B2C e-commerce site that isn’t offering a deferred or instalment payment plan of some description. Indeed, during the Black Friday shopping period of 2022, BNPL sales jumped 68% and revenue from such purchases reached new heights.
Enabling customers to access credit when they might not otherwise be able to has proved to be a hugely successful business model for companies like Klarna and Clearpay, who have helped put BNPL on the radar of shoppers around the world. So successful, in fact, are these BNPL platforms, that traditional institutions and incumbent players have begun to take notice and move towards the BNPL action.
In the past two years especially, the economic impact of the pandemic has helped to accelerate growth in this space because it has enabled consumers to delay or spread the payment of purchases that they may otherwise not have been able to afford. As a result, the global transaction value of BNPL is projected to reach $576 billion by 2026.
Now, the Buy Now, Pay Later wave is headed towards the world of B2B e-commerce.
BNPL for business is still a relatively young concept, but according to a recent report, more than half of the largest B2B marketplaces have already adopted a BNPL solution or have imminent plans to do so. Attention from banks isn’t confined to consumer BNPL, with players such as Citi, BNP Paribas and Deutsche Bank working on partnerships with B2B BNPL providers.
In this guide, we aim to help business leaders understand what B2B BNPL is and how it could help them to accelerate revenue and reach growth goals.
Buy Now, Pay Later definition
Let’s start with a definition of Buy Now, Pay Later that will inform the rest of this guide. Buy Now, Pay Later – otherwise known as BNPL – is a type of short-term financing enabling customers to make a purchase which is then paid for at a later date. The payment may be split across several instalments, or it may be paid off in one go, usually 30 days after the original purchase.
What is B2B BNPL?
Much like its B2C equivalent, B2B Buy Now, Pay Later is a form of short-term lending offered to business buyers at the point of sale (POS). It allows buyers to spread costs or delay payments, while merchants are paid upfront, thereby improving cash flow for all parties.
Due to its digital nature and fintech roots, B2B BNPL is often offered on e-commerce websites, marketplaces and other online platforms. However, B2B Buy Now, Pay Later products for telesales and omnichannel sales are also on the market.
Wait, isn’t that just trade credit?
In a way, yes. BNPL for business provides B2B merchants and marketplace owners with a safe, simple and sophisticated way to offer trade credit online, which is something that e-commerce sites, banks and the earliest generation of B2B paytech companies have struggled with for some time.
But it’s also a whole lot more than just trade credit.
Trade credit applications typically involve printing and filling out lengthy, complex forms, which then have to be returned to the merchant or marketplace for assessment. Buyers are often asked for copious amounts of information and references, only to then wait days to find out whether they’ve been approved for payment terms or not. Sometimes, buyers cannot access trade credit online because the complexity and risk of offering it is simply unviable for merchants.
With approved buyers eventually given the option to purchase goods, materials or services without having to pay upfront, the end goal of trade credit is similar to that of B2B BNPL, but there are two key differences making the latter a more commercially viable and sustainable option.
The seller gets paid up front.
Merchants offering traditional trade credit often do so off their own balance sheets, meaning that while the buyer gets improved cash flow, the seller experiences the opposite. Specialist B2B Buy Now, Pay Later providers take on the responsibility of financing the transactions themselves, meaning that buyers get the freedom to pay later while sellers are paid up front.
Sellers are protected against risk.
Fulfilling your customers’ orders before you’ve received any payment naturally comes with significant risks of late and missed invoices, but this isn’t the case when working with a B2B BNPL provider. Instead, risk is transferred to the third party, leaving both buyer and seller to focus on what matters – reaching their business goals.
The benefits of B2B BNPL for your business
B2B Buy Now, Pay Later offers a variety of benefits for the sellers who choose to offer it. Many of these – such as higher average order value and better conversion rates – relate to increasing sales and generating more revenue. However, some of the benefits are not as immediately obvious. For example, B2B BNPL can make it easier for you to forge customer loyalty and achieve international expansion goals.
Better conversion rates
B2B sellers that integrate a B2B Buy Now, Pay Later solution into their checkout report better conversion rates. For example, Hokodo’s clients report an average increase of 40%. As conversion rates increase, you'll get a better ROI, ultimately resulting in greater revenue.
Higher average order value
A higher average order value (AOV) means you’re earning more revenue without growing your customer base. Because you’re not targeting new business, your marketing and sales costs are lower. Sellers integrated with Hokodo see a 30% uplift in AOV on average.
Providing your buyers with a B2B Buy Now, Pay Later option at the checkout has been proven to generate more sales. At Hokodo, we have observed that buyers purchase 24% more frequently per month when offered the chance to defer payment.
Improved cash flow
With guaranteed upfront payment and full protection against credit and fraud risks, B2B sellers that partner with BNPL platforms enjoy healthier cash flow than those businesses that choose to offer credit from their books. With access to a greater amount of working capital, businesses can focus on growth.
Any B2B BNPL provider worth working with will have full credit and fraud risk protection built into their products. This helps to protect sellers against non-payment, ID theft, chargebacks, buyer insolvency and more.
Acquire new customers
Offering B2B BNPL can give businesses a competitive edge in the market. It differentiates them from competitors and attracts customers who value flexibility and convenient payment options. This advantage can be particularly significant in industries where cash flow management is crucial, such as manufacturing or retail.
Forge customer loyalty
B2B BNPL can help businesses retain customers and improve customer loyalty. By providing flexible payment options, companies make it easier for their clients to manage their own cash flows and continue purchasing from them. This can contribute to repeat business and increased customer satisfaction.
B2B BNPL platforms often help sellers to streamline their operational processes, making transactions quicker and more efficient. This can reduce administrative burdens, paperwork and the time spent on negotiating payment terms with suppliers.
Many B2B businesses, especially those selling online, have ambitious international growth goals. Integrating a B2B BNPL solution that is operational in your target markets makes expansion easier as there is no requirement to find and integrate new payment solutions in each region.
Which industries benefit most from B2B BNPL?
B2B Buy Now, Pay Later can be a boon for businesses in a wide range of industries. Often we work with marketplaces and merchants operating online, but we also work with more traditional businesses that have offline channels. We’ve seen particular successes in sectors such as:
The B2B Buy Now, Pay Later process works as follows:
Customers shop as normal. They don’t need to sign up with the B2B BNPL provider in order to access credit.
In the background, credit and fraud risk checks are carried out on the customer. The only information needed is the name and address of the business or, alternatively, their company registration number.
Suitable credit limits and payment terms are recommended by the BNPL provider. At the checkout, the customer sees only the payment terms for which they’ve been approved.
The customer chooses to Buy Now, Pay Later. They may have the option to delay payment by 14, 30, 60 or 90 days.
Once the goods have been delivered or the service provided, the seller is paid up front and in full. The customer then pays the BNPL provider in line with their payment terms.
The B2B BNPL provider takes care of risk and collections. Sellers can trade in the knowledge that they’re protected from all credit and fraud risk.
The graphic below demonstrates how Hokodo’s B2B Buy Now, Pay Later solution works.
You can also check out this video for a more detailed look at how we work with Ankorstore, one of the earliest adopters of our Buy Now, Pay Later solution.
Implementing B2B BNPL
Implementation of B2B Buy Now, Pay Later is a straightforward process. It often requires involvement of several stakeholders and the tech integration usually calls for some development resources.
Assessing your readiness for B2B BNPL
If you are a B2B supplier with an online platform, BNPL could be a great option not just for you, but also for your buyers, as it gives them another payment choice. If your business matches one of the descriptions below, you might be ready to implement a Buy Now, Pay Later solution.
E-commerce sites, marketplaces or platforms where it is important to get instant decisions on whether buyers are eligible for payment terms.
Businesses looking to expand internationally without rebuilding their trade credit processes for each country.
Businesses looking to grow their customer base rapidly without having to grow the size of the credit and collections team.
Businesses which need invoices paid quickly for cash flow but want to offer competitive payment terms.
Meanwhile, firms with a long sales cycle or those with a very stable client base may not get the same level of value from offering a BNPL solution. Similarly, firms whose operating margin is too small to accommodate the fees of a B2B BNPL provider will not be a good fit.
Choosing the right solution
Once you have decided that a B2B Buy Now, Pay Later solution is a good fit for your business model, you are faced with the next challenge: how to choose the right B2B BNPL provider.
There’s a growing number of B2B BNPL providers out there and each one offers a slightly different solution.
Some providers rely on outsourcing their underwriting and credit decisions, while others have taken the decision to bring this in-house because it allows for quicker decision making and greater agility.
US-based B2B Buy Now, Pay Later provider Resolve cannot guarantee that merchants will receive their payment in full, instead promising receipt of at least 90% of each invoice. Other providers, such as Hokodo, protect invoices in full so that merchants receive full payment, even if their buyer is unable or unwilling to pay.
Meanwhile TreviPay – another stateside provider – does not offer instant credit decisions, despite this being one of B2B BNPL’s core benefits for both buyers and sellers.
When it comes to the European market, most providers are restricted to a handful of countries. Hokodo is the only provider able to offer its B2B BNPL solutions across the whole of Europe, making it the right choice for international sellers and those with ambitious growth plans.
Other factors to consider include:
Ease of integration
We cover all these and more in an ebook exploring how to choose a B2B Buy Now, Pay Later provider.
We spoke with Blair Abrahams, our Director of Customer Success, to find out more about the implementation process of a B2B Buy Now, Pay Later solution.
“After you have chosen a B2B BNPL provider that is operational in your target markets and offers a solution that suits the needs of your business, implementation should be a straightforward process that can be broken down into 7 simple steps,” Blair told us.
The provider will take some time to learn more about your business and its need for a BNPL solution. They will work with you to define success criteria and provide more info about the integration process.
The provider will ask for business information and documentation. This will be reviewed for regulatory and compliance purposes.
You will be sent a contract to sign, confirming that you are happy with the terms of service.
You’ll meet with your CSM to agree the plan for implementation and set all workstreams in motion.
Your developers will meet with the provider’s solutions engineer to put in place a testing and integration plan. Developers are invited to set up a Sandbox environment for testing purposes.
The provider will work with you to identify and support any operational training needs to make sure the launch is a success. They may also provide marketing support.
Once your B2B BNPL solution is live, you’ll have regular reviews to monitor success criteria and discuss any adjustments that may be required to optimise the service.
“We were able to integrate within a week and a half, so that was really swift and very light-touch,” explains Goorts. Ultimately, this meant that FlorAccess and its customers were able to start reaping the rewards of B2B BNPL sooner.
Don’t get left behind – book a call with Hokodo today to find out more about how we can help integrate a Buy Now, Pay Later solution seamlessly into the existing checkout of your online store.
Still not convinced? Let’s take a look at some recent findings:
Over 50% of the largest B2B marketplaces have or plan to adopt a B2B financing solution imminently (Applico).
Two-thirds of companies are spending more online now than they did prior to the pandemic and those spending more have increased the value of their orders by an average of 45% (Sana).
90% of buyers expect the same experience buying on a B2B site as they do on a B2C site (Wunderman Thompson).
Of one thing we can be certain: B2B suppliers not offering simple and convenient payment terms online are at real risk of losing their customers to competitors who have already implemented a BNPL solution or plan to do so soon. The number of business buyers migrating their purchases to online channels is only going to grow in the coming months, as is the demand for a modern, digital alternative to trade credit.