What is B2B Buy Now, Pay Later?

Louis Carbonnier
Co-Founder and Co-CEO

It’s no secret that Buy Now, Pay Later (BNPL) has taken off like a rocket within consumer commerce in recent years. In 2022, you’d be hard pressed to find a B2C e-commerce site that’s not offering a deferred or instalment payment plan of some description.

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 fintech giants, 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 allowed consumers to delay or spread the payment for purchases that they would otherwise not have been able to afford. 

Now, the Buy Now, Pay Later wave is well and truly headed towards the world of B2B e-commerce – a world which is in dire need of a digital payments revolution. 

B2B Buy Now, Pay Later 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. Hokodo is a pioneer in this space, and we want to help e-commerce platform founders and leaders to understand what B2B BNPL is and how it could help them to grow their businesses.

What is B2B Buy Now, Pay Later?

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 usually offered on e-commerce platforms and marketplaces, but can also sometimes be found in telesales and on the shop floor. 

Wait, isn’t that just trade credit?

In a way, yes. Buy Now, Pay Later 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 if they want to buy 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.

  1. The seller gets paid upfront.

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. Most of today’s 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 get paid upfront.

  1. 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 do what they do best – run their respective businesses. 

Beyond that, the key benefits of B2B Buy Now, Pay Later revolve around selling more and growing your business:

  • Better conversion rates – Our clients report an average increase of 40%.
  • Higher average order value (AOV) – Merchants and marketplaces integrated with Hokodo see a 30% uplift in AOV.
  • More sales – Access to BNPL on business purchases results in 24% more purchases per month.
  • Buyers and sellers both benefit from improved cash flow, enabling all parties to focus on what they do best: running their respective businesses.

How does B2B Buy Now, Pay Later work?

There’s a handful of B2B BNPL providers out there and each one offers a slightly different solution.

Billie, for example, whose partnership with Klarna has recently made the news, offers a BNPL product that relies on outsourcing underwriting and credit decisions. Other providers 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. Many other providers 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.

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 our Buy Now, Pay Later solution could work for your marketplace or e-commerce store.

What’s next?

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 e-commerce businesses 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.

Don’t get left behind – book a demo 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.