Sat. Dec 10th, 2022
Buy Now Pay Later

BNPL (Buy Now Pay Later), which is a business-to-business payment alternative, is growing rapidly and could even become the standard alternative for payment. Using this option, retailers can buy on credit and clear their dues later at their convenience. 

The customers using BNPL apps have grown by over 160%, and by 2023 BNPL could account for more than 2% of the world’s expenditure on eCommerce.

Explaining the Buy Now Pay Later

Business-to-business e-commerce companies have the BNPL option on their platforms. Customers can use this option to buy on credit and repay the amount in small instalments over a period of time. This period can be anything between a week to three years.

Whether it is B2B eCommerce or B2C transactions, the BNPL option effectively addresses the problem of cash liquidity for the buyer as well as the seller. For a B2B business model, this option ensures instant payment for the merchant, reducing their risk. On the other hand, retailers can repay the amount in instalments, reducing their burden.

Why it is beneficial to choose BNPL for B2B

For the B2B e-commerce segment, BNPL will do what the Cash-on-Delivery option did for B2C e-commerce. It will give an unprecedented fillip to the business. It is a very convenient option for merchants who are accustomed to doing business on credit alone.

Here are some reasons why the B2B e-commerce segment is choosing this typically B2C payment option:

Merchants are habituated to purchasing on credit

For years, retailers have been operating on credit. Distributors sell to the retailers on credit. Bookkeeping keeps the process streamlined, but it is informal. As a result, E-commerce platforms are also compelled to provide similar facilities to their customers. These platforms can 

Successfully compete with local distributors by –

1. Offering more convenient terms and bigger loans 

2. Providing loans to retailers who are new in the market by underwriting alternative data. As a result, they don’t have to follow the age-old process of gaining the supplier’s trust.

3. Providing different types of loans for a variety of purposes.

With the help of credit, retailers can buy more and increase their business despite restrictions with liquidity.

MSMEs require flexibility Buy Now Pay Later

MSMEs are known to face certain problems while operating, such as dealing with a sudden demand, managing different types of capital needs, and dealing with cash flow issues. This is where BNPL comes to the rescue. With the help of BNPL, retailers no longer have to face the constraints and can avail the benefits of flexibility in the schedule of repayment. As a result, they can focus more on the problems of cash flow. They can take some sigh of relief as:

1. They can capture more business opportunities as quickly moving the funds around.

2. Their business is not affected by less cash flow     

3. They can easily maintain and increase their financial condition   

Uninterrupted payment option

Merchants can enjoy the benefit of quick credit in context while exiting with the help of BNPL. B2B industry payments are more frequent and greater in volume as compared to the B2C market. This is why an uninterrupted payment option is beneficial in the case of the B2B industry.  

How can one compare BNPL with other payment modes?

BNPL vs. term loans

If someone requires a large amount of money at any given point in time, they will opt for a term loan as they are the go-to option in such situations. The term loan process is time-consuming, and one is bound to face several problems during the process. Due to this reason, this option is not favoured by many these days. 

Contrastingly, BNPL offers the uninterrupted movement of money, which can be availed by anyone at any point in time. The revolving credit system makes this easy movement possible in the case of BNPL. As a result, it has become a convenient option.  

BNPL vs. credit cards

BNPL powered by credit line offers more approval rates and fewer interest rates when compared to credit cards. The BNPL credit terms are much more transparent and can be understood with ease compared to credit cards.

Why do E-Commerce platforms need to leverage BNPL for B2B?

BNPL credit options have the following advantages to offer:

1. Greater acquisition to activation ratio – In order to bring in more customers opting for BNPL credit is one of the best solutions. 

2. Greater CLTV and platform stickiness – Gross Merchandise Value, Customer Lifetime Value, and Average Order Value are some of the areas that are positively impacted by BNPL. With the help of BNPL, platforms can look achieve greater heights of business. 

3. Platforms can be differentiated from competitors – When a platform offers uninterrupted credit options to its merchants, it is bound to make it stand out from the competition. 

Conclusion

BNPL (Buy Now Pay Later) is becoming more and more popular in the B2B world and is sure to achieve more success in the future.  

By Manish