Business-to-business (B2B) BNPL is BNPL tailored for companies working in the B2B space. It is particularly popular in the growing B2B eCommerce field.
For example, a small business that supplies retailers might want to purchase $5,000 worth of goods from a wholesalers. Using BNPL, they can pay off their purchase over 6 months.
As with consumers, this leaves businesses with better cash flow than if they had paid straight away to buy everything upfront. This cash flow can then be used in other areas of the business.
Advantages of B2B BNPL
B2B businesses using BNPL can increase their cashflow and their cashflow flexibility – this means that cashflow can be increased quickly and efficiently at short notice.
It’s particularly useful when – for example – companies want to take advantage of discounts. They can get discounted rates that wouldn’t have still been available had they deferred purchases.
B2B BNPL is also more accessible than many other types of B2B loans and financing. Unlike traditional business loans, there are less credit checks and faster credit decisioning and onboarding experiences.
BNPL companies (i.e., companies offering BNPL services) tend to be alternative lenders, not traditional banks.
Trade credit, by contrast, can require a more lengthy approval process, credit value decisions, and setting payment terms unique to a particular business. In short, BNPL is much more convenient for most customers that trade credit in the short-term.
But before we look at these, let’s look at the fundamental similarities between the two types of BNPL.
B2B & B2C BNPL similarities
The B2B and B2C buying processes are different, but the buyers are the same.
In simple terms, B2B buyers are also B2C buyers. So, they already understand and trust BNPL as a convenient, secure and simple way to pay.
And they have gotten used to a seamless user experience with multiple payment options.
2. Technology fundamentals
The payment technology behind BNPL is more or less the same regardless of the commercial context it is used in. The same basic elements need to be integrated in order to enable and underwrite purchases without money being put down upfront.
A variety of technologies are used such as point-of-sale (POS) systems, mobile applications, automatic clearing house (ACH) processing and online payment gateways.
B2B & B2C BNPL differences
Business buyers make decisions in very different contexts from regular B2C customers.
In the business world, purchases are often necessities or investment-like decisions. Each payment is a means to an end or something made with the goal of gaining a financial return.
B2C collections are usually more straightforward. Their late payment fees can actually benefit the BNPL company. Smaller average order values mean individual late B2C payments don’t negatively affect cash flow at the level they do for B2B companies.
B2B buyers pay transaction fees
The long net terms involved in B2B payments mean that BNPL providers often charge buyers BNPL transaction fees for using the service.
In B2C, however, it’s usually sellers who pay these fees. In return, they benefit from the resulting increased frequency, volume of sales, and market penetration that BNPL can bring.
70 percent of B2B decision makers say they are open to making new, fully self-serve or remote purchases in excess of $50,000, and 27 percent would spend more than $500,000.
3. Payment terms
The basic concept of paying for something at a later date has existed in business for a long time. Net 30, 60 or even 90 terms are the norm for many B2B sectors.
So, spacing out B2B BNPL terms over relatively long timeframes is nothing new. In B2C BNPL, this concept isn’t necessary – though it does exist for other consumer financings options, such as car re-payments and mortgages.
In recent years, buy now pay later solutions have become very popular with consumers in retail. Even with higher levels of regulation, this growth looks set to continue.
So perhaps it is no surprise that the B2B buyers have also begun to use it, too. After all, many of them are also B2C buyers in their free time.
But despite sharing the same name and the same customers, B2B and B2C BNPL are quite different solutions.
It all comes down to context, in particular the unique aspects of B2B transactions, including scale, value, payment methods and payment terms.
B2B decisions are made with a secondary goal in mind – usually one related to increasing revenue. B2C decisions tend to be the opposite. So despite sharing the same name, BNPL in both categories has a distinctly different nature.