B2B Buy Now, Pay Later promises to revolutionise B2B payments.
Published 26th July, 2023
Last updated 6th March, 2023
B2B Buy Now Pay Later (BNPL) enables business buyers to defer payment or divide purchase costs over a certain period by providing the buyer with interest-free trade credit, while the seller gets paid straight away.
Offering trade credit for B2B transactions has long been a difficult terrain to navigate, complicated by lengthy admin, credit risk, and tedious customer onboarding. These are typical challenges you won’t often find B2C given the less complex buying process. It also explains, in part, why B2B BNPL has lagged behind for so long.
However, huge technological strides have been made in recent years that finally bring the BNPL model to B2B. Being described as “fintech’s answer to the age-old concept of invoice financing”, BNPL has the potential to completely change the way businesses buy and sell from one another.
How does B2B Buy Now, Pay Later work?
BNPL has actually been a form of payment for some time in business, known as net terms, trade credit, or purchasing on invoice. Typically the buyer pays for their goods or services over 30, 60, or 90 days. Purchasing on invoice essentially allows the buyer to take a line of credit from the seller and pay at a later date.
There are, however, inherent problems baked into this type of payment, particularly for the seller. The seller takes on the credit risk whilst being forced to wait until the end of the invoice term, leading to issues with cash flow.
Additionally, managing the admin and dealing with customer onboarding can be a tedious process that can take days (or even weeks) to complete.
To alleviate these problems, BNPL for business offers a simpler way of offering your business customers net terms with some considerable benefits including:
- Increased conversions rates
- Drastically reduced admin time
- Offset credit and fraud risk
- Improved cash flow
Below you can see the simple stages involved in how we offer our customers B2B Buy Now, Pay Later:
Why the rise in B2B BNPL?
While COVID-19 put the world on pause for 2 years, positive advances in the B2B space emerged. The BNPL B2C model started making its way over to B2B and now, more and more business customers are expecting an experience akin to their B2C purchases.
This can be partly explained by how familiar B2B buyers are with financial technology. Given 73% of all professional B2B purchasing decisions are made by millennials, the increasing assumption is that B2B companies will offer the same seamless purchasing experience as B2C.
For example, a study by McKinsey found that 96% of B2B buyers might make a purchase in a fully end-to-end, digital self-serve model.
Additionally, more and more sellers are taking their businesses online. A further McKinsey study found that business buyers favour online purchasing due to its convenience and ease, as in-person or phone transactions are no longer efficient in terms of time.
These shifts in the way sellers and buyers interact have greatly influenced the way B2B payments work.
The benefits of B2B Buy Now, Pay Later
At a surface level, you’d be forgiven for thinking trade credit and B2B BNPL are the same thing. There are a lot of similarities, but it’s the differences that make B2B BNPL such a revolutionary solution.
B2B BNPL solves many of the pain-points involved with offering trade credit. Simply put, it offers a way for sellers to offer trade credit in a much safer, simpler, and sophisticated way.
1. Upfront payments
One of the drawbacks of traditional trade credit is that the seller is forced to wait until the end of the invoice term until they receive payment. This can lead to a whole host of cash flow problems for the seller that prevents them from growing their business and expanding.
To mitigate this, it’s common to resort to invoice factoring, invoice discounting, or bank loans - none of which are an optimal way of growing. But the nature of BNPL B2B means that merchants are paid upfront for their invoices, often with help from financial institutes the B2B payment platforms work with.
Any B2B payment platform worth its salt will also reconcile payments. That means saying goodbye to chasing late payments on a daily basis.
2. Removes risk for merchants
Working with third parties to run credit and ID checks is a necessity if you manage invoice purchases in-house. However, once a buyer is approved, there’s still risk involved. What happens if the buyer doesn’t pay? And how do you know if the ID verification or credit checking process was comprehensive enough?
Merchants operating with little fraud knowledge are often left exposed, sometimes with dire consequences. BNPL B2B removes that risk. B2B payment providers perform comprehensive credit and fraud checks then and there for an uninterrupted buying experience.
For the seller, that means being able to offer net terms without the stress of fraudulent orders.
3. Cuts admin time
Many merchants are simply unable to tap into the demand of purchases by invoice because it requires too much manual work. Managing an invoice payment solution in-house requires specialist staff to organise invoices and stay on top of payments.
But with BNPL B2B, merchants can simplify operations across multiple departments and save time, making it super easy to stay organised and save multiple hours a week in manual work.
Outside of these unique advantages, B2B BNPL continues to help sellers with increased average order value, conversion rates, and customer retention:
- Increases average order value and conversion rates. Buyers who don’t use credit cards have to float their working capital by fronting their expenses to make purchases. And the companies who do use credit cards often run into card limits that prevent them from buying what they need.
But BNPL B2B makes purchases seamless. Buyers no longer need to chase down that one employee with a corporate card or expense business purchases on their own account. This ultimately allows buyers to place larger orders without running into cash flow problems while increase B2B sales for the seller.
For example, our merchants typically see a 60% increase in average order value. That’s certainly not the limit though! The same can be said for conversion rates, with our merchants seeing a 20% uplift after offering BNPL B2B.
- Increases customer retention. The issue of a complicated checkout experience for B2B buyers shouldn’t be understated. In fact, 77% of B2B buyers say their latest purchase was either difficult or very complex.
Loaded with useful features for this very reason, BNPL B2B solves the all too familiar challenges of merchants who want to offer their customers net terms. Offering a BNPL B2B solution that works for your customer ensures (or at the very least increases) your chances of keeping them loyal.
Two - The Complete B2B Payment Suite
Selling B2B with Buy Now, Pay Later can be incredibly complex. But it doesn’t have to be. With Two’s B2B payment suite, you can increase conversion rates and average order value while eliminating admin and offsetting credit risk.
Whether you want to supercharge your B2B e-commerce checkout, optimise your trade account with frictionless onboarding, or offer B2B BNPL on all sales channels - Two is here to help.
Two’s payment technology enables businesses across all industries to offer purchasing on invoice, providing a frictionless checkout experience with instantly approved credit. Our revolutionary B2B solutions simplify the payment journey so businesses can access working capital and increase B2B sales while reducing time consuming operational work.