BUY-NOW-PAY-LATER offers SMEs another source of credit.
Although generally available on the consumer market for about a decade, the Buy-Now-Pay-Later (BNPL) electronic payment model finally bears fruit for micro, small and medium-sized enterprises (MSME) by avoiding payments Interest on business credit cards, reduce documents, facilitate faster transactions and improve liquidity management.
The BNPL Business-to-Business (B2B) transaction operates similarly to the BNPL Consumer Company Transaction (B2C). Once a third party has made a credit check and assumes the risk of non-payment credit, a buyer can delay the payment of a fixed period or to pay whole or payments.
Using B2B BNPL, MPMEs avoid type their credit lines to pay invoices and avoid commercial credit negotiations. For suppliers, it works as a reverse invoicing, where the buyer uses a third party to pay the invoice immediately and reimburses a third party financing later.
Many MPMs in sectors such as retail, manufacturing and technology have become the first adopters of B2B BNPL, according to Arjun Singh, partner and world leader in financial technology for the practice of financial services at Arthur D. Little ( ADL). “In addition, the markets are increasingly incorporating B2B BNPL in the context of their integrated financing and financial innovation strategies, helping businesses meet liquidity challenges and rationalizing payment processes.”
The travel and hotel industry has also plunged its toe into the new payment model fired by their short -term and seasonal needs, adds Nilesh Vaidya, a global manager of banking and capital markets in Capgemini. “Restaurants have had a difficult race in the past two years and they are looking for this credit. So they are there. They want to get this kind of loan faster, and it is an interesting company for banks. »»
The areas where B2C and B2B BNPL divergent are maturity, market size and customers. The B2B BNPL sector is in its infancy compared to the B2C BNPL sector, which has benefited from the hyper-growth of electronic commerce and a growing basis of young users with little or no credit history.
“It has become a must not only in retail but in various sectors,” explains Singh. “According to some estimates, B2C BNPL represents around 5% of global electronic commerce spending.”
The travel and hotel industry has also plunged its toe into the new payment model fired by their short -term and seasonal needs, adds Nilesh Vaidya, a global manager of banking and capital markets in Capgemini. “Restaurants have had a difficult race in the past two years and they are looking for this credit. So they are there. They want to get this kind of loan faster, and it is an interesting company for banks. »»
The areas where B2C and B2B BNPL divergent are maturity, market size and customers. The B2B BNPL sector is in its infancy compared to the B2C BNPL sector, which has benefited from the hyper-growth of electronic commerce and a growing basis of young users with little or no credit history.
“It has become a must not only in retail but in various sectors,” explains Singh. “According to some estimates, B2C BNPL represents around 5% of global electronic commerce spending.”
On the other hand, B2B BNPL is a sleeping giant who is ready to wake up. It is motivated by larger and often more complex transactions. The authors from a point of view published by ADL estimated that B2B BNPL would capture 15% to 20% of all B2B payments by the end of the decade.
“This would be equivalent to around 25 to 30 billions of dollars in BNPL volume and, assuming average BNPL costs from 3% to 4% per transaction, a total addressable market between $ 700 billion and 1.3 billion of dollars”, they wrote.
Geographically, BNPL is a global phenomenon available in around 80 markets, the markets of Asia-Pacific leading to adoption in China and South Asia, such as Malaysia, Indonesia and Singapore, according to Vaidya. “After that, we have seen much more applicability in Europe, because immediate access to payments is better. In the United States, there have been many new BNPL suppliers. »»
Where the credit is due
The BNPL model would not work without third parties taking the risk of non -paying credit. Fintechs – like Klarna, Sweden, Australia afterpay and the affirmation of America – paved the way for the B2C BNPL space, capturing considerable market share while widening their offers.
However, Vaidya de Capgemini notes that banks will probably dominate the BNPL B2B market.
“Klarna and Afterpay have a lot of retail customers, people who buy in shopping centers and large area retailers or in an online electronic commerce store,” he said. “Banks are better in the small and medium size size segment.”
While fintechs continue to unravel the B2B market, banks already have existing financial relations with MPMs and their suppliers and offer them another way to provide credit to their commercial customers. This is particularly true for companies with revenues from the range of $ 20 to 50 million and has struggled to obtain loans with small tickets historically.
However, the results of financial institutions are not all pink. B2B BNPL activity has the cost of commercial credit card costs and those generated by the activity sectors of factoring and information from a bank.
“In the past, a company would go to buy something on its commercial credit card, and a bank would generate costs on the transaction,” explains Vaidya. “When an immediate payment option is possible, they can pay their suppliers directly when they didn’t need credit. Banks must therefore do something. »»
Banks have become large with their BNPL B2B offers. The global banking giants Banco Santander and BNP Paribas began to offer their respective BNPL services to their large multinational customers in 2023 via partnerships with payment platforms and commercial insurance providers. Banco Santander Corporate Investment Bank has launched its turnkey service, which incorporates the payment platform of the Net-Terms TWO infrastructure provider and the services of the insurance broker Marsh Spain and the insurance provider Allianz Trade .
“The fact that buyers must use personal or business credit cards are still hindering B2B transactions. Allowing companies to maintain their payment habits within 30 or 60 days depending on their invoices in an electronic commerce environment will be a large differentiating for sellers while adding a major change of play: all concerns about the risk of non-payment are now deleted, and their cash flows are kept at any time, “said Ignacio Frutos Lopez, Banco Santander CIB worldwide claims at the time of launch.
Three months later, BNP Paribas launched its service in partnership with Hokodo, a B2B payment platform provider that can be integrated into existing payment platforms via an API. The service provides real -time credit decisions, transactions financing, credit and fraud insurance and recovery capacities.
Move forward
Despite its remarkable potential growth, B2B BNPL still has some obstacles to overcome. According to the authors of the ADL ViewPoint, awareness and regulation of customers are the main concerns, followed by risk assessment, product structures, cross -border trade problems, technological integration, costs and competition.
“An important part of the target market must be educated on the advantages and risks of the proposal,” said Singh of ADL.
According to Capgemini research, the expected adoption rate of BNPL will remain stable for the next two years. In a study of electronic trade actions by cash method, the BNPL obtained a share of 5% in 2023 and should have a share of 5% in 2027. Meanwhile, credit cards, which have had a share of 22% in 2023, should shrink at a share of 15% over the same period.
As the size of the entire BNPL market increases, regulators invest more efforts to process BNPL offers as distinct from more in the longer term. However, according to Eric Mitzenmacher, partner of the Mayer Brown law firm, the BNPL specific regulations remain emerging in many jurisdictions.
“The United States – despite the fertile market for BNPL offers due to the size of its economy and certain useful regulatory factors – is one of the most complex and evolving regulatory environments for BNPL”, he said. “Many other jurisdictions currently have more permissive environments for BNPL, in particular for BNPLs offered to SMEs compared to consumers, with the potential exception of BNPLs offered by banks and financial institutions regulated in a similar way.”
Singh agrees, saying: “Unlike consumer credit, which has a relatively uniform settlement between jurisdictions, commercial loans and credit regulations are diverse and fragmented, devoid of the same clarity, in particular in cross -border scenarios . “
Even with these obstacles, Singh expects B2B BNPL to have an adoption curve similar to its consumer counterpart and gain traction in several sectors and types of transactions. “While trade continues to unify between the channels and customers require greater personalization, the scope and the impact of the B2B BNPL are developing considerably, offering companies increased flexibility and financial options.”