Is BNPL changing the B2B credit landscape?

It’s likely that, as a consumer, you have used some kind of deferred payment system. Buy Now Pay Later (BNPL) has taken that idea and digitized it – and its star is on the rise.

As B2B increasingly becomes a digital space, BNPL solutions can answer market needs while offering advantages to both buyers and sellers. By embracing this new technology, financial and payment service providers have the opportunity to lead the evolution of B2B trade.  

Online B2B sales are skyrocketing. In France, the market is around one and a half times bigger than B2C in volume. The average basket in B2B is €1,800 compared to €60 in B2C, and we predict a 37% increase in the volume of B2B transactions by 2025. ¹

Financial players have a lot to gain by providing a payment solution to support this growth. And that’s what BNPL offers. As a concept, it’s not new – in fact, it could be described as a kind of instant digital factoring solution. It works by enabling merchants to “sell” a buyer’s debt to a BNPL company in order to receive payment as soon as an order is placed. The buyer agrees to a deferred payment plan, receiving a "request to pay” notification from the BNPL provider after a specified delay.

Before this technology, trading companies typically worked with at least three different companies. First, a bank would provide customers with a payment solution. Then, an insurer – such as Allianz Trade – would be involved for deferred payment coverage, and finally a financing institution would handle the financial part. BNPL solutions integrate those three services into a digital one-stop-shop: a factoring 2.0 payment solution.

_¹ Source : Statista

From existing companies trying to diversify their distribution channels to start-ups looking to capture market share and seamlessly connect with customers, all online merchants can benefit from BNPL. Simple, easy to integrate and interest-free, the solutions enable sellers to increase short-term revenue, average sales, conversion and repeat purchase rates – all while maintaining cash flow control.

Adopting a BNPL solution also streamlines the entire transaction process, for both buyers and sellers. For merchants, reduced time spent on risk analysis and recovery means more time focused on core business activities. Meanwhile, buyers profit from a straightforward method of obtaining credit terms without having to go through a long “Know Your Customer” procedure with their supplier.

Different types of risk are emerging due to the growing use of BNPL solutions in B2B trade, including instantaneous buyer onboarding and, consequently, fraud. Combatting these challenges requires a transformation of the risk assessment process – and the use of advanced digital tools.

We have developed real-time response technology powered by an application programming interface (API). The tech works alongside BNPL providers’ fraud detection mechanisms to analyze a buyer’s purchase behavior and transactions, enabling an instant credit coverage response.

BNPL offers the B2B market a unique opportunity to transpose deferred payment solutions that were already offered offline to an online setting – in a strongly regulated space. By digitizing credit and packaging credit insurance within payment solutions, these providers are changing the landscape of B2B trade.

At Allianz Trade we strongly believe that BNPL solutions could underpin future trading. This is why we are working alongside those forward-thinking businesses as a trusted partner, sharing our experience to help build the solutions of tomorrow.