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A relative newcomer to the world of B2B payments, Buy Now Pay Later can be a win/win for both you and your customers.

When Buy Now Pay Later (BNPL)...

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A relative newcomer to the world of B2B payments, Buy Now Pay Later can be a win/win for both you and your customers.

When Buy Now Pay Later (BNPL) first appeared on the scene, it was quickly embraced by retail and those selling via B2C eCommerce platforms as a sort of “instant gratification” version of layby. Businesses who offered a BNPL payment option saw cart abandonment decrease, order values increase, and they even gained new business. In fact, 56% of Australian businesses surveyed by ACA Research said they had attracted new customers due to their adding a BNPL service1. While B2C initially raced ahead, in many cases, B2B organisations left BNPL payment options out of their eCommerce offerings, unless they were also selling direct to consumer. Wholesalers, distributors – and most importantly, their customers - simply didn’t see a way for the B2B market to take advantage of buy now pay later offers, as they stood at the time.


Now, all of that is changing.

 

Buy now, pay later: Designed for Business

For B2C consumers, Buy Now Pay Later takes the form of interest free, short-term financing. Credit is extended to the retail customer based on the total cost of their purchase, and their repayments are structured in a range of easy to understand ways, depending on the BNPL provider in question.

 

For B2B buyers, the concept of buying now and paying later isn’t exactly new – it's what standard invoicing terms and paying on account are based on. However, the ability to spread payments out over several months via instalments is not widespread B2B practice.
Seeing a clear market need, leading online payment platform Zip have recently expanded their BNPL product offering to include line of credit options designed especially for trade customers. Zip Business Trade is a BNPL product designed just for business, where the customer has an ABN and is purchasing on behalf of a company. It also comes with far greater credit limits than a traditional B2C consumer might receive.

 

In terms of the business case, while the thought of merchant fees may initially raise some questions, B2B sellers are rapidly discovering that - even accounting for some modest fees - potential benefits including increased sales, improved cash flow and reduced exposure to risk far outweigh implementation costs and ongoing fees. In fact, some Zip Business customers have reported increases of 30% in sales, 70% in order value, and 80% in repeat business2.

 

All in all, for B2B providers – and particularly those looking to drive incremental performance through their B2B eCommerce channels, BNPL for Business looks exceptionally compelling. Let’s summarise the potential benefits, across three key areas:

 

1. Benefits at the checkout

First and foremost, BNPL for Business is already delivering a compelling business case for the top line. Be it lower cart abandonment, increased purchase frequency or increased cart size, the benefits numbers are clear. It bears repeating that Zip B2B customers, in particular, have reported up to 30% increases in sales and 70% increases in order value. Repeat business has gone up nearly 80% for some.

 

2. Benefits in reduced cost to serve

The old 80/20 rule in business states that 80% of profits come from 20% of customers.


For many B2B wholesalers and distributors, this rings especially true when considering cost to serve. Companies are extending credit to many of their smaller customers, allowing them to pay on account. This results in Accounts Receivable staff issuing countless receipts for low value orders, chasing outstanding payments for hundreds of customers, and generally spending a disproportionate amount of time reconciling payments. Research by PYMNTS found that 41% of small businesses considered chasing up outstanding accounts to be a major pain point3.

 

In contrast, if these same smaller customers were instead given a digital wallet to pay for their orders, there would be no accounts receivable follow-up required. For the B2B merchant, the benefit of up-front payment goes hand in hand with reduced cost to serve.

 

Let's look at an example: 

ABC Widgets is a B2B distributor with 2,500 customers. The 80/20 rule says that their biggest and best customers comprise 20%, the other 80% of those are small accounts. For argument’s sake we’ll say that half of those 2,000 small customers pay for their orders with credit card on checkout.

That leaves 1,000 accounts who pay on account every month, that an ABC Widgets staff member has to chase up and issue a cash receipt for. The cost to serve would be high, especially in relation to the lower value nature of orders and sales to this group.

Replacing account credit with a Buy Now Pay Later trade option also reduces fraud and credit risk, bad debt, and the need to chase payment from 1,000 different customers every month. Any associated eCommerce payment gateway fees would almost certainly be (significantly) lower than the cost to serve in the previous scenario - not to mention the benefit of up-front payment and a faster order-to-cash cycle.

 

3. Benefits for the customer

As compelling as BNPL for Business may sound by now, it’s critical to ensure that what we’re considering also works for our customers. And the good news is Buy Now Pay Later provides all customers – even COD accounts – with the ability to leverage payment terms, where they might otherwise be required to pay in full at checkout. This can have a positive effect on the customer’s cash flow, allowing them to make larger purchases via easy to understand terms. Good for the customer, good for your business.

 

Summary

Buy Now Pay Later is no longer just for B2C, with B2B eCommerce providers rapidly seeing the benefits. Businesses of any size can now take advantage of lines of credit for eCommerce purchases large and small, and they’ll prefer suppliers who offer this payment option at checkout. In fact, 17% of surveyed BNPL users reported they would cancel their purchase if they discovered they could not make payment with a BNPL option4.

 

A market leading B2B eCommerce platform will support your BNPL offering with full integration to major payment providers. If you haven’t considered Buy Now Pay Later for your B2B customers, now is the perfect time to do so.


If you’d like to learn more about Buy Now Pay Later for B2B eCommerce, BOOK A CALL WITH US.

 

 

 

Sources:

1 - ‘Buy Now, Pay Later looks here to stay - and here's what you need to know’ - https://www.paypal.com/au/brc/article/enterprise-solutions-buy-now-pay-later 

2 - Zip Business Payments - https://zip.co/au/business/payments/ 

3 - ‘Businesses Want Trade Credit to be as Fast, Easy and Available as Buy Now Pay Later’ - https://www.pymnts.com/buy-now-pay-later/2021/businesses-want-trade-credit-to-be-as-fast-easy-and-available-as-buy-now-pay-later/ 

4 - ‘Developments in the Buy Now, Pay Later Market’ - https://www.rba.gov.au/publications/bulletin/2021/mar/developments-in-the-buy-now-pay-later-market.html 


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