Buy Now, Pay Later (BNPL) in B2B is emerging as an innovative financing solution, providing businesses with better cash flow management while optimizing the customer experience. In this article, we analyse the benefits and challenges of this approach, comparing it to traditional solutions such as trade credit and factoring..

B2B BNPL: An Underutilized Growth Lever

BNPL is based on a simple principle: allowing buyers to acquire goods and services immediately while deferring or splitting their payment. Long favored by B2C consumers, especially in online and physical retail, it is now gaining even more traction in B2B, where deferred payment is a key issue in the purchasing cycle. 

Like BNPL in B2C, its application in B2B follows the same model, except that the beneficiary is a business. It is offered either by direct suppliers (distributors or sellers) or through marketplaces. 

  • Individual Suppliers (Distributors or Sellers): These companies sell directly to other businesses in various sectors such as industrial equipment or office furniture. They often need BNPL solutions tailored to both online and in-store sales to meet customer expectations.
  • Marketplaces: These platforms connect buyers and sellers within the same sector or across multiple markets. Their exponential growth in recent years makes them natural candidates for adopting digital BNPL solutions.

In theory, a supplier can offer a BNPL solution to its business clients, especially when they are few in number and loyal. In fact, many businesses already offer payment facilities through trade credit. 

However, when a supplier must manage a diverse and fluctuating customer base, in-house financing quickly shows its limitations. This is due to several factors: 

  • Limited balance sheet capacity of the company
  • Complexity in assessing customer risk
  • Operational constraints in managing a large volume of buyers

To be effective, a BNPL solution must achieve an approval rate of at least 80%. This is a significant challenge for suppliers, who can quickly become overwhelmed. This is where specialized B2B BNPL providers come in, capable of handling fencing and risk management. 

Maximizing Profits While Managing Risks

BNPL B2B stands out as a strategic solution because it addresses two fundamental challenges in the sector: 

  • Easier access to financing: By offering deferred payment options at the point of sale or online, it bridges the financing gap for SMEs, providing them with more flexibility in their purchases. 
  • Better cash flow management: With flexible payment terms, businesses can optimize their liquidity flow and reduce financial constraints.

BNPL B2B offers several advantages that make it even more promising than its B2C counterpart: 

  • A considerably larger market: The B2B sector represents a business volume about five times greater than B2C. 
  • Larger transactions: The amounts exchanged in B2B are much higher, generating more significant revenue for BNPL providers. 
  • Stronger loyalty: Long-term business relationships encourage repeat purchases from the same suppliers, ensuring a high adoption rate of BNPL.
  • An underutilized need: B2B BNPL directly addresses cash flow and working capital issues, which remain a major challenge for SMEs. 
  • A lever for internationalization: By facilitating cross-border payments and standardizing credit terms, B2B BNPL paves the way for simplified global expansion.

Despite its many advantages, implementing a B2B BNPL solution requires careful risk management. 3 key aspects must be considered: 

1.Managing Debt 

Ensuring that businesses do not over-indebt themselves beyond their financial capacities. B2B BNPL offers valuable flexibility, but it can also encourage some companies to spend beyond their means. Unlike B2C consumers, business buyers are generally better equipped to make informed financial decisions. However, suppliers have a key role to play in preventing over-indebtedness by implementing: 

  • Clear communication on payment terms and financial obligations.
  • Awareness initiatives to encourage responsible use of BNPL.
  • Strict financial checks to assess customer solvency.

The goal is to ensure that businesses can benefit from B2B BNPL without compromising their financial stability. 

2.Transparency of Terms

Clarifying financing terms to avoid confusion and ensure responsible usage. Hidden or poorly understood fees, such as late penalties, can create frustration and harm the customer experience. To prevent this, suppliers must adopt an absolute transparency policy by: 

  • Clearly detailing fees and terms from the outset.
  • Avoiding any ambiguity in the pricing structure and potential penalties. 
  • Facilitating access to information so that customers can make informed decisions.

Exemplary transparency fosters trust, enhances customer satisfaction, and reduces the risk of attrition.

3.Customer Risk Management

Preventing adverse selection by establishing strict criteria to identify the most creditworthy companies. One of the challenges of BNPL is attracting less solvent borrowers, which presents a higher risk for suppliers. Strict credit checks are therefore essential. However, unlike B2C BNPL, where some consumers use the service due to a lack of funds, businesses primarily adopt B2B BNPL to optimize their cash flow rather than finance purchases they could not otherwise afford. 

  • Implementing strict controls to assess the financial strength of clients.
  • Continuously monitoring payment behavior to adjust terms if necessary. 
  • Segmenting buyer profiles to identify the most reliable businesses.

By securing these aspects, suppliers can reduce risks and ensure the sustainable adoption of B2B BNPL. 

The Differences 

B2B BNPL clearly stands apart from other supply chain financing solutions. The “Buy Now, Pay Later” version is similar to traditional trade credit, where suppliers offer payment terms to their business customers. However, several key differences exist: 

  • Risk and Credit Evaluation Transfer: With BNPL, the analysis and management of the risks are handled by the BNPL provider, requiring a more rigorous assessment. 
  • Instant and Standardized Decisions: Unlike trade credit, which relies on pre-existing relationships, BNPL provides immediate credit decisions, even for new buyers, thus reducing paperwork.
  • Third-party Intervention: Financing is facilitated by a BNPL provider, not directly by the supplier. 
  • Immediate Payment to the Supplier: The BNPL provider pays the supplier immediately (minus fees), handling the administrative management and debt collection. 
  • More Flexible and Customizable Terms: BNPL offers greater flexibility compared to traditional models.

Although it often relies on mechanisms similar to factoring, B2B BNPL differentiates itself in several ways: 

  • Buyer Initiative: Unlike factoring, where the supplier sells their receivables, BNPL is initiated by the buyer, resembling reverse factoring but with implementation at the time of purchase. 
  • Control of Customer Relationship: Some factoring models involve losing control of the customer relationship, while BNPL maintains this link. 
  • Lower Cost: In factoring, receivables are sold at a discounted rate, while BNPL typically applies a smaller discount.

A Colossal Opportunity 

B2B BNPL represents a significant potential, relying on the massive business-to-business market, estimated at around €120 trillion in 2022 across all channels (offline and online), according to Activant Capital. Although B2B has historically lagged behind B2C in e-commerce—a domain where BNPL excels—it is quickly catching up and is expected to surpass other channels in the coming years.  

B2B BNPL is projected to experience double-digit annual growth, reaching 15% to 20% of B2B payments by 2030. Given the global expansion of the sector, this would represent a BNPL volume of $25 trillion to $30 trillion. With average transaction fees of 3% to 4%, the total addressable market could range from $700 billion to $1;3 trillion, making B2B BNPL a trillion-dollar opportunity by 2030.

These projections highlight the scale of the market and the enormous potential for BNPL providers globally. While B2C BNPL has already proven its success, the opportunity in B2B is even larger. In fact, businesses have long relied on flexible payment solutions like trade credit, which accounts for up to 30% to 50% of B2B sales depending on the year, according to Atradius. 

An Emerging Market 

B2B BNPL is generating strong interest, with a vast market and competent players. However, it has not yet reached widespread adoption. 2 main factors explain this delay: 

  • Slower Adoption in B2B: Traditionally, financial innovations first appear in B2C, where they benefit from rapid adoption. Over time, businesses eventually demand the same user experiences they enjoy as consumers.
  • Structural Challenges: B2B BNPL is hindered by the complexity of intercompany lending, particularly higher credit limits, increased risks, more complex credit approval decisions, and longer and more diverse payment terms.

Providers that can overcome these obstacles while offering reliable, secure, and tailored solutions will be the major winners in this rapidly expanding market. 

Conclusion: A Trillion-Dollar Potential 

B2B BNPL is expected to see double-digit annual growth in the coming years. By 2030, it could capture 15% to 20% of the B2B payment market, representing a multi-trillion-dollar opportunity. Its impact on intercompany transactions and its role in facilitating payments for millions of SMEs make it an unavoidable trend. RollingFunds is fully aligned with the B2B BNPL dynamic by developing a technology platform that offers an integrated financing experience for the professional clients of B2B businesses. This B2B BNPL solution provides tailored credit terms, adapted to the needs of businesses. It benefits both buyers and sellers, strengthening their commercial relationships and facilitating their exchanges..