Buy-now-pay-later offers SMEs an alternate in installments source.
Although mostly disposable successful nan user marketplace for astir a decade, nan physics costs exemplary of buy-now-pay-later (BNPL) is yet base consequence for micro, mini and midsize enterprises (MSMEs) by avoiding liking payments connected firm in installments cards, reducing paperwork, facilitating quicker transactions, and improving liquidity management.
The business-to-business (B2B) BNPL transaction useful likewise to nan business-to-consumer (B2C) BNPL transaction. After a 3rd statement runs a in installments cheque and assumes nan in installments consequence of non-payment, a purchaser tin hold costs for a fixed play aliases salary successful full aliases installments.
Using B2B BNPL, MSMEs debar tapping their in installments lines to salary invoices and debar waste and acquisition in installments negotiations. For suppliers, it useful for illustration reverse factoring, wherever nan purchaser uses a 3rd statement to salary nan invoice instantly and reimburses nan financing 3rd statement later.
Many MSMEs successful sectors for illustration retail, manufacturing and exertion person go early adopters of B2B BNPL, according to Arjun Singh, partner and world caput of fintech, financial services believe astatine Arthur D. Little (ADL). “Additionally, marketplaces are progressively incorporating B2B BNPL arsenic portion of their embedded finance and financial invention strategies, helping businesses reside liquidity challenges and streamline costs processes.”

The recreation and hospitality manufacture besides has dipped its toed into nan caller costs exemplary driven by their short-term and seasonal needs, adds Nilesh Vaidya, world caput of banking and superior markets astatine Capgemini. “Restaurants person had a challenging tally successful nan past mates of years, and they’re looking for that credit. So they are into that. They want to get that benignant of indebtedness quicker, and it is an absorbing business for nan banks.”
The areas wherever B2C and B2B BNPL diverge are maturity, marketplace size, and customer base. The B2B BNPL assemblage is successful its infancy compared to nan B2C BNPL sector, which has benefited from e-commerce’s hyper-growth and a increasing guidelines of young users pinch small aliases nary in installments history.
“It has go a must-have not only successful unit but crossed various sectors,” says Singh. “According to immoderate estimates, B2C BNPL accounts for astir 5% of world e-commerce spending.”
The recreation and hospitality manufacture besides has dipped its toed into nan caller costs exemplary driven by their short-term and seasonal needs, adds Nilesh Vaidya, world caput of banking and superior markets astatine Capgemini. “Restaurants person had a challenging tally successful nan past mates of years, and they’re looking for that credit. So they are into that. They want to get that benignant of indebtedness quicker, and it is an absorbing business for nan banks.”
The areas wherever B2C and B2B BNPL diverge are maturity, marketplace size, and customer base. The B2B BNPL assemblage is successful its infancy compared to nan B2C BNPL sector, which has benefited from e-commerce’s hyper-growth and a increasing guidelines of young users pinch small aliases nary in installments history.
“It has go a must-have not only successful unit but crossed various sectors,” says Singh. “According to immoderate estimates, B2C BNPL accounts for astir 5% of world e-commerce spending.”
On nan different hand, B2B BNPL is simply a sleeping elephantine that is fresh to awaken. It is driven by larger and often much analyzable transactions. The authors of a viewpoint published by ADL estimated that B2B BNPL would seizure 15% to 20% of each B2B payments by nan decade’s end.
“This would adjacent astir $25-$30 trillion BNPL measurement and, assuming mean BNPL fees of 3%-4% per transaction, a full addressable marketplace betwixt $700 cardinal and $1.3 trillion,” they wrote.
Geographically, BNPL is simply a world arena disposable successful astir 80 markets, pinch nan Asia-Pacific markets starring take successful China and South Asia, specified arsenic Malaysia, Indonesia and Singapore, according to Vaidya. “After that, we person seen a batch much applicability successful Europe because nan contiguous costs entree is better. In nan US, location person been galore caller BNPL providers.”
Where Credit Is Due
The BNPL exemplary would not usability without 3rd parties taking connected nan non-payment in installments risk. Fintechs—such arsenic Sweden’s Klarna, Australia’s Afterpay, and America’s Affirm—blazed a way for nan B2C BNPL space, capturing sizeable marketplace stock while expanding their offerings.
Nonetheless, Capgemini’s Vaidya notes that banks will apt predominate nan B2B BNPL market.
“Klarna and Afterpay person a batch of unit customers, individuals who are buying successful malls and large container retailers aliases connected an e-commerce online shop,” he says. “Banks are doing amended successful nan mini and midsize endeavor segment.”
While fintechs proceed to ace into nan B2B market, banks already person existing financial relationships pinch MSMEs and their suppliers and connection them different measurement to supply in installments to their commercialized customers. This is particularly existent for businesses pinch revenues successful nan $20-$50 cardinal scope and had trouble obtaining small-ticket loans historically.
However, financial institutions’ results are not each rosy. The B2B BNPL business comes astatine nan costs of commercialized in installments paper fees and those generated by a bank’s factoring and reverse factoring business lines.
“In nan past, a business would spell and bargain thing connected its commercialized in installments card, and a slope would make a interest connected nan transaction,” explains Vaidya. “When an contiguous account-to-account costs action is possible, they tin salary their suppliers straight wherever they didn’t request credit. So nan banks request to do something.”
The banks person gone large pinch their B2B BNPL offerings. Global banking giants Banco Santander and BNP Paribas began offering their respective BNPL services to their ample multinational clients successful 2023 via partnerships pinch costs platforms and waste and acquisition security providers. Banco Santander Corporate Investment Bank launched its turnkey service, which incorporates nan costs level from net-terms infrastructure supplier Two and nan services of security agent Marsh Spain and credit-insurance supplier Allianz Trade.
“The truth that buyers person to usage individual aliases firm in installments cards is still hindering B2B transactions. Enabling businesses to support their costs habits wrong 30 aliases 60 days of their invoices successful an e-commerce situation will beryllium a large differentiator for sellers while adding a awesome crippled changer: each concerns astir non-payment consequence are now removed, and their rate travel is preserved astatine each times,” said Ignacio Frutos Lopez, world caput receivables astatine Banco Santander CIB astatine nan clip of nan launch.
Three months later, BNP Paribas launched its work successful business pinch Hokodo, a B2B costs level supplier that tin merge pinch existing checkout platforms via an API. The work provides real-time in installments decisions, transaction financing, in installments and fraud insurance, and postulation capabilities.
Moving Forward
Despite its imaginable singular growth, B2B BNPL still has a fewer hurdles to overcome. According to nan authors of nan ADL viewpoint, customer consciousness and regularisation are nan starring concerns, followed by consequence assessment, merchandise structures, cross-border waste and acquisition issues, exertion integration, costs and competition.
“A important information of nan target marketplace needs to beryllium knowledgeable astir nan benefits and risks of nan proposition,” says ADL’s Singh.
According to investigation by Capgemini, BNPL’s expected take complaint will stay level for nan adjacent mates of years. In a study of e-commerce shares by checkout method, BNPL garnered a 5% stock successful 2023 and is forecasted to person a 5% stock successful 2027. Meanwhile, in installments cards, which had a 22% stock successful 2023, are predicted to shrink to a 15% stock complete nan aforesaid period.
As nan size of nan full BNPL marketplace increases, regulators are investing much effort successful addressing BNPL offerings arsenic abstracted from emblematic longer-term interest-bearing loans. However, according to Eric Mitzenmacher, a partner astatine nan rule patient Mayer Brown, BNPL-specific regularisation remains nascent successful galore jurisdictions.
“The US—despite being a fertile marketplace for BNPL offerings owed to nan size of its system and definite adjuvant regulatory factors—has 1 of nan much analyzable and quickly evolving regulatory environments for BNPLs,” he says. “Many different jurisdictions presently person much permissive environments for BNPL, peculiarly for BNPLs offered to SMEs versus consumers, pinch nan imaginable objection of BNPLs offered by banks and likewise regulated financial institutions.”
Singh agrees, saying, “Unlike user credit, which has a comparatively azygous regularisation crossed jurisdictions, business lending and in installments regulations are divers and fragmented, lacking nan aforesaid clarity—especially successful cross-border scenarios.”
Even pinch these hurdles, Singh expects B2B BNPL to person a akin take curve arsenic its user counterpart and summation traction crossed aggregate sectors and transaction types. “As commerce continues to unify crossed channels and customers request greater personalization, nan scope and effect of B2B BNPL will grow significantly, offering businesses accrued elasticity and financial options.”