Scaling up SMEs with the power of BNPL

As buyers, SMEs stand to reap substantial benefits from the extra liquidity and efficiency that automated solutions provide. Let’s say I own a small construction company that builds custom homes from 8 am to 5 pm. After working all day, I sit down to handle the business side at 7 pm, and I need two things: supplies and credit.

Thanks to e-commerce, purchasing is now available on the web, 24 hours a day. But I need to know that if I buy a product on credit, my application will be processed immediately, and the supplies will arrive on my site when I need them. With an integrated BNPL solution providing an instant, automated credit decision, I can order supplies outside of business hours safe in that knowledge.

For sellers, these solutions enable companies to streamline their operations by outsourcing almost all the steps in an online transaction. After a client makes a purchase, the supplier fulfills the order and receives payment within 72 hours. Voila, the supplier’s role is complete.

Meanwhile, the BNPL provider takes care of the rest: the upfront credit decisions, cash reconciliations, and the ultimate collection of the account from the buyer. While small business sellers typically trade 3-4% of their revenue for BNPL services, in many cases the added value makes this an excellent proposition.

All BNPL solutions use a high-tech, secure method of storing and transferring data in real-time. This method uses application programming interfaces (APIs), which enable insurers such as Allianz Trade to receive data and make credit limit recommendations within milliseconds.

The level of transparency encompasses all of the technical factors surrounding what the supplier is providing the SME – risk profiles, on-time shipping standards, product recalls, etc. It also includes a client’s payment track record on the other side. That means we have a clear window into the strength of the entire supply chain.

Generally, the weakest link is the SME in the middle that doesn’t possess a great deal of data or assets. Traditional underwriting models don’t really fit for them but, thanks to this data, we can leverage the strength of those two ends of the supply chain. This means that we can offer solid credit terms that really help develop the SME space and drive innovation forward.

In other words: better data facilitates better underwriting. Better underwriting means BNPL players can loan larger sums. And bigger loans mean more data is gathered to support our underwriting. It’s a truly virtuous circle.

Small companies today are tomorrow’s powerhouses. Look at BNPL providers themselves. Ten years ago, they were the same size as the companies they are serving today. And through partnerships with insurers such as Allianz Trade, these rapidly growing small businesses can help even smaller businesses grow.

Our support mitigates credit risk from suppliers, enabling SMEs to comfortably take more risk. This, in turn, provides the opportunity for small players to scale up their businesses. Being part of this journey is really exciting, meaningful work – everyone benefits from the incredible synergy present within the space, and all parties grow and profit together.