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A guide to Buy Now, Pay Later for businesses

In today’s digitised world, more and more businesses are looking for streamlined payment methods to lower their processing time. Often, this can in turn increase their ROI (Return on Investment). They are also looking to streamline their workflows and to create better checkout experiences due to the shifting demands of B2B buyers.

The shifting expectations of B2B buyers

According to research conducted by McKinsey, B2B buyers have been steadily but increasingly moving towards making purchases online instead of in-person or over the phone. In fact, these days, e-Commerce has become the most effective channel for many B2Bs.

No doubt, the pandemic has accelerated this shift. Social distancing rules and national lockdowns have made the past few years difficult to conduct business in person, and many buyers found it necessary to transition online.

With this change in channel, McKinsey reports that buyer expectation also spiked. B2B buyers these days are very clear about what they want from their merchants, vendors, and suppliers. They are also very willing to take their business somewhere else if their needs are not met.

Amongst a variety of buyer’s needs, one that ranks highly is a smooth checkout experience and purchase process. With many B2B buyers accustomed to the streamlined checkout processes of B2C retailers, they are expecting the same from B2B sellers. They want to be able to have flexibility in choosing their own payment terms, and they want their payments processed quickly.

B2B sellers have had to adjust to this expectation, and many have landed on alternative payment methods. One of such methods is Buy Now, Pay Later for businesses.

What is B2B Buy Now, Pay Later?

Buy Now, Pay Later for businesses is often shortened to B2B BNPL. It is when a B2B seller works with a BNPL payment provider (such as Biller) and integrate the payment solution into their online shop. BNPL gives their buyers the option to make the transaction immediately without having to pay upfront.

Often, this deferred payment is divided into equal instalments. The buyer gets to choose over how many months they would like to spread their payment across, and these payment terms have no impact on when the seller gets paid.

Alternatively, payment terms can dictate that the buyer must make the payment in full after 30, 60, or 90 days. This all depends on the payment provider.

Why is B2B BNPL gaining popularity?

Both sellers and buyers are finding B2B BNPL a favourable alterative payment method for a few reasons.

Why sellers are attracted to B2B BNPL

What makes B2B BNPL attractive to sellers is the fact that it poses them little financial risk.

The BNPL provider essentially acts as a middleman in these transactions. When the sale goes through and the buyer selects their payment terms, the provider pays the seller first, as they await payment from the buyer.

B2B BNPL gives sellers the security and peace of mind they need to continually grow their business. It also provides them with healthy cash flow to keep running the business. Additionally, it means someone else takes care of the invoicing.

B2B buyers are notorious for being late in invoice payments. Across sectors and regions, many sellers have to chase invoices or worry about defaulted payments. Not only does this pose significant financial risk on the seller, but it also drains valuable employee time and resources.

With a BNPL provider on board, B2B sellers can also avoid having to conduct credit checks themselves.

Often, B2B purchases are big-ticket, and sellers must conduct manual checks on buyers to ensure they have good credit and will be able to make the payment. This process can take up to days and it can be labour-intensive. This is particularly true of buyers that are small to medium businesses with no known reputation.

A lot of BNPL providers these days offer automatic credit checks done by AI. Machine learning makes it much faster to conduct credit checks, and approval rates are also much higher. AI can conduct a reliable credit check in seconds and approve transactions right away, increasing the seller’s revenue and the buyer’s satisfaction.

Why buyers are B2B BNPL

Buyers not only find satisfaction in quick transactions, but they are also drawn to the immense flexibility B2B BNPL offers.

Many B2B buyers who make large purchases may not be able to pay the full amount upfront. This is particularly true for buyers in the manufacturing and construction sectors. A builder who purchases materials to renovate a client’s house will not be able to pay his vendor immediately, because his client will only pay him when the renovations are done.

The buyer has the option to pay for his materials with a credit card. However, he will not have the flexibility in choosing when to make the payments, and how much money he would like to pay when the invoice is due.

With BNPL, the builder gets to choose in how many instalments he would like to pay for his transaction, and when he pays them. This frees up his financial burden and helps him maintain a healthy cash flow.

What to consider when choosing a B2B BNPL provider?

As more and more sellers are jumping on the BNPL train, the fact remains that this payment method is a relatively unexplored area in the B2B space. There are certain things to be aware of when selecting a provider to ensure you choose the one that is right for you. Below are some factors to consider:

Payment terms

Not all B2B BNPL providers offer the same payment terms. Some of them will be able to offer your buyers deferred payment in equal instalments, while others will offer deferred payment upfront in 30, 60, or 90 days. Knowing what works for your industry and what your clients prefer is the key to meeting their needs.

Operating region

You must take your region into account when selecting a provider. Make sure they operate in your area and can process payments in your most-transacted currencies. You should also take note of whether a provider can offer cross-border BNPL options if you are a global brand with international customers.

Resources and capabilities

Additionally, consider the kind of training and resources a BNPL provider can offer you and your employees. Do they help with the implementation process and are they clear about how their solution works? If something goes wrong, do they have a team of professionals to support you? Do they conduct all credit checks on your behalf, and what are their reporting capabilities?

Pricing and fees

Finally, you must consider how much it would cost for you to work with a B2B BNPL provider. Take time to understand pricing structures and whether your buyers will have to pay any extra money to use the provider’s services. You should also make sure there are no hidden fees and additional charges that can creep up to you down the line.

The bottom line

Changing B2B buyer expectations do bring about new complexities for B2B sellers. However, the rise of the use of alternate payment solutions in the B2B space has been a testament to merchants’ innovation. BNPL is still in its infancy in the world of business transactions. However, it has so far proven itself to be one worth keeping an eye on, as sellers who adopt BNPL offerings find plenty of growth opportunities.