Welcoming the Rising Star of BNPL Model: B2B BNPL

The BNPL model that we know today, B2C BNPL, is a system that is common to many people. Now, BNPL players are starting to try to enter a new market, direct to business model.

The Covid-19 pandemic accelerated a shift towards online shopping in e-commerce as one of the leading platforms for BNPL. As a result, BNPLs are growing faster than ever before. Hundreds of thousands of new customers register for BNPL every day. Their valuation and share price also shows a good number. So, it’s time for BNPL players to expand their business.

BNPL Expansion

Some BNPL players expand their business by operating diversified businesses, such as providing consumer credit with interest-free and interest-bearing installment payments, digital banking, online wealth management, and insurance broking products. However, they also started to expand their business by attracting other business players with their business-to-business (B2B) BNPL. B2B BNPL, aligned with its name, is a short-term financing product for businesses to fulfill their needs from other business players, such as suppliers, distributors, or marketplaces. This is a bright solution for the common challenge, especially for small businesses: allocating capital to purchase upfront. Even with tighter cash flows, working capital constraints, and cyclical demand, now small businesses can buy more products needed with B2B BNPL.  

Let's take a look at an example. A small retailer consistently buys commodities weekly from a distributor or B2B marketplace. Here, B2B BNPL products can act to extend a line of credit to sufficiently cover 15 days of inventory with a flexible repayment option. This way, the retailer does not scramble for liquidity for order purchases, while the distributor is guaranteed invoice payments. 

Benefits of BNPL for The B2B Seller

There are several benefits of BNPL for B2B sellers and buyers.  

1. Gets Paid Upfront

While usually, the merchants offer traditional trade credit off their own balance sheets, with B2B BNPL, BNPL providers will take on the responsibility of financing the transactions. Thus, buyers get the freedom to pay later while sellers still get paid upfront.

2. Risk Protection

With B2B BNPL, the risk of late and missed payments will be handled by BNPL providers. Both buyer and seller only have to do what they do best – run their respective businesses. 

3. Higher Volume of Transactions

Merchants can provide buyers with appealing short-term financing options from the B2B BNPL system. This interesting offer can lead buyers to transact in a higher volume.

Benefits of BNPL for The B2B Buyers

1. Greater Credit Limits

B2B BNPL will provide greater credit limits for its customers - buyers also business players - than a traditional B2C customer might receive.

2. Short-Term Financing Option with Low or No-Interest 

BNPL providers offer low or no-cost short-term financing on buyers' purchases. Compared to merchant cash advances and business credit cards which typically have double-digit annual percentage rates (APRs), B2B BNPL will be more beneficial for buyers.

3. Improved Cash Flow

With B2B BNPL, the system will help buyers to keep as much cash on hand as possible to prepare themselves facing an unpredictable business environment

B2B BNPL provides objective value such as flexibility, lesser time and effort, and configurability to each customer's specific industry and financing needs. The B2B BNPL offers ease to businesses that lack working capital and purchase financing, which this BNPL is allowing them to focus on other aspects of their business. The B2B BNPL is easy to apply to small businesses with its transaction-based and cash flow-based underwriting. With sound risk mitigation, such as traditional credit data, open banking, and alternative data usage to assess credit criteria, B2B BNPL is an excellent solution to choose by BNPL providers, buyers, and sellers in B2B areas.

B2B BNPL Risks

However, B2B BNPL has a higher potential risk and loss than B2C BNPL. While the average B2C BNPL purchase is around $200, in B2B BNPL, the amount can reach thousands or even millions. Furthermore, the B2B transaction is much more complex than the B2C transaction. Usually, it has longer sales cycles, more personalization, and more bundled services. This leads to difficulty in the instant approval system, which the BNPL providers should build. Therefore, BNPL providers must build a better strategy to quantify and prevent potential risks for B2B transactions. Then BNPL providers can provide a low-risk BNPL transaction for them and be convenient for B2B sellers and buyers.

So, how about the future of BNPL industries in Indonesia? What strategies could be applied to survive the BNPL industries? Can B2B BNPL be successfully applied in Indonesia? Or are there any other questions you are curious about related to BNPL?

Talk to our experts today by contacting Askpert.id. We will be happy to help you get the most suitable experts to provide you with the right insights about the BNPL industry.