How Is B2B Buy Now Pay Later Helping SMEs Grow

Buy Now Pay Later has gradually become the face of modern transactions. By the year 2024, BNPL has marked a pivotal presence in the global markets. While it was at a nascent stage in 2021 with just 9% BNPL transactions globally, the numbers are expected to reach 24% by 2026. From small to medium enterprises and even high-income economies have joined this wave. India is also witnessing a rise in various BNPL companies in India. 

The success of Buy Now Pay Later is majorly due to the payment comfort it offers. Unlike credit cards, the instalments in BNPL are interest-free. Whether it’s about budgeting expenses or cash crunch, BNPL can offer industries in multiple ways. In today’s times, BNPL is not limited to B2C markets. B2B companies are also comfortably adopting the buy now pay later option. Various industries have entered the BNPL facility and have witnessed remarkable growth! Let’s discuss B2B BNPL and its impact!

Industries Affected by the Rise of BNPL in B2B

The BNPL reached a $200 billion transaction in 2022 itself. By 2030, the market is expected to grow at a CAGR of over 26%. Various industries like Fintech, lending, and e-commerce are the forefront participants in B2B BNPL. While trade credit and similar payment methods have existed, BNPL has changed the landscape.

Fintech Industry

The idea of immediate purchase without having to make complete payment is not a new one. Payments in instalments have existed for a long period. However, recent innovations and digital facilities have rejuvenated the system! Among all, fintech industries have witnessed remarkable benefits from buy now pay later companies in India.

• Rapid technological advancements driving the adoption of BNPL solutions 

Fintech companies had a small representation in the markets a few years ago. With the recent technological and digital advancements, fintech markets have witnessed unparalleled growth. Various companies have come up with BNPL options to support not just B2C but also B2B transactions. Companies can create their accounts and make immediate purchases in bulk. The payment, however, can be done at a later date without any interest charged on it.

• Intensified competition among fintech companies offering BNPL services

Some of the top BNPL companies in India are from the fintech industries. Their lion’s share of profit from BNPL payments is also one of the reasons for their rise. The recent surge in the BNPL payments has led to intensified competition among leading fintech companies for dominance in this sector. From offering payment flexibility to collaborating with e-commerce platforms, competition is evident everywhere. Apps like Simpl and other similar platforms have made big names in this sector.

• Opportunities for collaboration with e-commerce platforms and traditional lenders

In the race to be the leader, fintech companies are also collaborating with various e-commerce platforms and traditional lenders. It is a win-win for both lenders and the buyers. Lenders and e-commerce platforms are witnessing a decline in payment default risks. On the other hand, buyers get access to simplified cash flow management. All these in turn have led to the increasing popularity of both fintech industries and the BNPL transactions.

Lending Industry

The BNPL payment mechanism has also hit the lending industries. The long queues outside banks and financial institutions are now a thing to remember. Let’s understand how BNPL transactions have transformed the lending industries for B2B marketplaces:

• Transition from conventional lending methods to digital BNPL models

With BNPL lending facilities, various companies can get loans within a few clicks. Gone are the old days when complex documentation and spending hours in a bank were the only way out of a loan. Now, you can get access to quick loan disbursement through BNPL models. Digital access to cash flow and quick loans have transformed the way companies manage their capital requirements.

• Effects on interest rates and credit scoring mechanisms in B2B markets

Earlier, various B2B transactions suffered due to the high interest rates. However, with BNPL facilities, the traditional financial models of high interest rates have been disrupted. While credit cards, trade credit, loans, and similar facilities are not going anywhere soon, BNPL has definitely made the task easier for medium and small enterprises. This competition has also led to a decrease in the interest rates charged by lending companies.

• Potential for higher revenue through transaction fees and interest charges

BNPL is increasing its participant base day by day. In the coming future, the numbers are only expected to increase. The revenue of the BNPL industries is going to witness a surge due to a large number of transactions. Generally, BNPL methods do not charge any interest rate but a fine for late payments. So, the profit on transaction fees can add up to the overall revenue generation for BNPL lenders.

E-commerce Industry

The rise of digitization has impacted the e-commerce industry to a great extent. Companies that barely existed decades ago are now the tycoons of the market. BNPL payments have further proved to be the game-changer for e-commerce industries. Let’s understand how! 

• The surge in online B2B sales fostering the adoption of BNPL payment options

Online sales have taken over marketing by big numbers! About 45% of sales are happening online in India, making it one of the leading countries globally in terms of digital sales! ² The BNPL payment options have only accelerated sales. For small sellers and medium enterprises, BNPL acts as a major advantage. Popular e-commerce platforms are rapidly collaborating with leading Pay Later apps like Simpl, Amazon Pay Later, etc.

• Competitive edge for businesses offering BNPL services to their clientele

Today’s market competition for e-commerce companies requires them to offer a little extra to their clientele. The buy now pay later feature can be one of these! It gives a competitive edge to businesses in the marketplace. Also, the process becomes much easier for small, medium, and even large enterprises as they no longer have to solely depend on lengthy loan processes for cash flow!

• Enhanced customer satisfaction and loyalty through flexible payment solutions

Flexibility of payment also widens the customer base. From end consumers to B2B companies, BNPL has made payments easier than ever before for everyone. The zero-interest pay-later option instills satisfaction and also builds a loyal customer base!

Benefits of Buy Now Pay Later in B2B

The buy now pay later option has benefited industries in multiple ways. Although the BNPL payments initially offered flexibility to B2C companies, gradually, it also entered a major segment of B2B industries.

Financial Flexibility

Financial flexibility in a business can be of utmost importance. From managing cash flow to purchasing essential resources and maintaining timely payments, BNPL helps in various ways:

• Enables businesses to manage cash flow efficiently

Cash flow is one of the quintessential requirements for any business. Loans used to be one of the basic reliable options in times of cash crunch. However, with BNPL payments, it has become much easier for businesses to manage cash flow efficiently. For payments that can be made after a few days, businesses no longer have to look out for frequent loans!

• Facilitates spreading out large purchases into manageable payments

Large purchases are no longer a difficult decision. Businesses can easily spread out large purchases into manageable payments. Instead of paying the complete amount at once, companies can maintain their cash flow and resources while clearing out payments in small amounts over a period of time.

• Provides a financial buffer during periods of uncertainty or tight budgets

Even during times of tight budgets, businesses need to maintain cash flow and keep the process going. During such times, making complete payments for essential purchases can be difficult. This is when the buy now pay later feature comes as a saviour! Managing uncertainty and immediate cash requirements is now easier with BNPL.

Competitive Advantage

The buy now pay later also gives businesses a competitive edge over their counterparts. Here’s how:

• Attracts and retains customers by providing innovative payment options

Paying later with zero interest is what most people prefer, whether it is a company or an end consumer. So, BNPL has definitely led to a wider customer base with increased retainment rates than ever before!

• Drives increased sales revenue by boosting transaction volumes

Pay later apps like Simple, LazyPay, etc. have also increased transaction volumes. BNPL has also reduced large purchases, thus, boosting sales revenue. Not just for end consumers but flexible payments have also made purchases more accessible to companies.

• Enhances brand image as a customer-centric and forward-looking business

Adopting modern technologies and payment solutions reflects the flexible approach of a business. Along with enhancing the brand image, it also represents the customer-centric sentiment of a brand, thus, building a wider customer base!

Conclusion

BNPL has significantly impacted the B2B industries. From enhancing the ease of cash flow to managing large payments, the pay later feature offers multiple benefits. The positive outlook of both companies and customers towards BNPL has made payments flexible, easier, and more accessible to everyone. In the coming years, the expected rise in the BNPL market will not only add to the interests of consumers and companies but the Indian economy as a whole!