Buy now, pay later (BNPL) models are already a major presence in online B2C markets. Links to BNPL companies are increasingly found on checkout pages for popular online stores. As this new trend continues to grow, many are wondering what effects BNPL will have on B2B transactions.
What is buy now, pay later?
The premise is simple: Instead of requesting full price up front or extending credit with traditional terms, customers pay in installments without accruing interest when payments are made on time. Third-party vendors typically process these payments. In the consumer market, BNPL has grown more common in recent years, and even buying a pair of jeans online can launch a widget offering consumers the option to pay for them in three easy installments.
At its core, BNPL is purchasing on credit — minus the interest rates — with a heavy tie-in to third-party payment processing services. The first step for implementing a BNPL model is evaluating its suitability for your business.
What does this change?
BNPL payment options aren’t gaining much traction in B2B transactions. At least, not yet.
A version of buy now, pay later already exists in B2B commerce, but the modern BNPL concept isn’t the same as traditional commercial credit, and it could compete with long-established B2B credit systems.
Implementing BNPL solutions in a B2B context will require preparation and extra considerations, including:
- Credit approval improvements. B2B underwriting processes are often extensive and time-consuming. Streamlining and/or outsourcing commercial credit approval is increasingly time and cost efficient.
- Disruptions to current models. Credit cards and traditional commercial credit accounts cannot avoid disruption when new payment models are introduced. Consider introducing a BNPL model as an option for your most reliable customers first.
- Compatibility with specific services/transactions. The reliance on third-party processing is one potential downside of BNPL in B2B. Unlike individual B2C transactions, online commerce for B2B companies can be complex. A one-size-fits-all approach isn’t necessarily appropriate for commercial accounts.
Most of these are long-term considerations, but BNPL could soon be a viable commercial credit option. You’re already busy running a business, and small steps in preparation now are better than trying to switch systems quickly when BNPL gains more traction.
What does this mean for existing businesses?
You have long-term goals to consider, but there are some actionable steps you can take now to make sure you’re ready when BNPL hits big.
Start with research. Whether investigating on your own or consulting with financial experts, accurate, timely, and relevant information is your company’s most valuable resource.