Buy now, pay later vs trade credit:
The differences, explained​

Although ‘buy now, pay later’ (BNPL) and traditional credit share some common aspects, they differ in a few key ways:

‘Buy now, pay later’ grants payment funds to the seller instantly. This is sourced from a BNPL operator, such as Allianz Trade pay, who will then recoup the money from the customer.

With trade credit, sellers are only paid once customers make the payment.

‘Buy now, pay later’ offers a much faster approval process for new customers, usually giving the green light within a few seconds to a few minutes.

Traditional credit, however, usually takes  a longer time to approve, which can be due to the larger transaction volumes.

‘Buy now, pay later’ solutions usually offer incentives to customers who meet payment dates, such as a few interest-free instalments if an initial payment can be made in full. After this, however, ‘buy now, pay later’ will apply an interest charge. Allianz Trade pay, for example, allows for payments to be made up to 90 days after the invoice was submitted.

Trade credit, meanwhile, is usually offered without interest.

With ‘buy now, pay later’, customers can set a payment schedule that works for them at the point of purchase. This could mean recurring monthly payments with a deposit, or several larger payments without interest.

Trade credit, on the other hand, has its own flexible approach to handling payments, including deferred payment options and payment periods that can span months or years.

Most ‘buy now, pay later’ providers offer an automated payment collection service. This involves customer standing orders/direct debits, or automating the payment via a bespoke payment processor.

With trade credit, the seller usually handles the collection processes themself.

After assessing a customer’s creditworthiness, ‘buy now, pay later’ systems will automatically evaluate their risk profile and approve or deny their purchase.

With trade credit, the seller decides whether to trade with the customer.

To minimise liability risk, ‘buy now, pay later’ providers will conduct a range of checks automatically while assessing creditworthiness.

When extending credit, businesses can source protection from an external insurance product, such as Allianz Trade Trade Credit Insurance. With trade credit insurance, businesses can set credit limits for their customers based on risk factors identified by Allianz Trade. This allows businesses to trade as usual, and if a customer doesn’t pay, they are covered.

Here’s a top-level summary of the differences between BNPL and traditional trade credit:

So, which one will you choose?

B2B Buy Now, Pay Later tools such as Allianz Trade pay offer customers an intuitive checkout interface. Allianz Trade pay handles the credit checks and sets payment schedules– no administrative burden needed.

Allianz Trade Trade Credit Insurance  provides proactive risk prevention processes and protection to keep your business covered if a buyer defaults. Whether you’re a smaller business or an industry-recognised leader, we are is here to help.

Discover our insurance solutions