- Offering BNPL in B2B trade requires a shift in business owners’ mindset. The buyers' journey has already evolved in B2C; B2B trade is now catching up / closing the gap and business owners have to adapt.
- More than 70% of B2B buyers find buying from a website more convenient than buying from a sales representative.
- BNPL is the preferred payment method for B2B buyers.
- B2B buyers expect a similar online purchasing experience to those they enjoy as consumers.
The Buy Now, Pay Later model has become a major trend in B2C e-commerce in recent years. Its increasing popularity is primarily due to the convenience it offers customers, who can place orders and then pay for them later. However, the Covid-19 pandemic also played a role, driving many people to purchase online as they hesitated to go out and shop in person.
This trend is also noticeable in B2B e-commerce. B2B trade customers now increasingly expect the same convenient payment methods they are familiar with shopping as a consumer when buying for their company.
In B2C and B2B, Buy Now, Pay Later is the most popular payment method. However, business customers are offered this option much less frequently and in more cumbersome ways than private consumers, who can easily pay by invoice and installment purchase in almost every online store.
In this post, we'll look at how Buy Now, Pay Later differs for B2C and B2B and how these differences affect availability in online stores. We'll also explore how this "availability gap" can be closed by partnering with external payment solution providers.
What does Buy Now, Pay Later (BNPL) mean?
First, let's clarify what we mean by the term "Buy Now, Pay Later," which has become a big trend in e-commerce:
Simply put, BNPL means that goods and services are purchased first and paid for later – effectively a purchase on account. This applies to transactions in the B2C sector and between trade customers.
The term covers various payment methods. The most popular BNPL payment methods include purchase on account by bank transfer, purchase on account by direct debit and installment purchase. Some online stores offer only one of these BNPL payment methods, while others allow shoppers to choose between different options at the checkout.
The requirements for B2B BNPL are comparatively high
The demand for BNPL for B2B online purchases is at least as high as in B2C. Even so, the availability of BNPL for B2B buyers is significantly lower. Many B2B online stores and marketplaces do not offer their shoppers BNPL because of the higher requirements for BNPL in B2B, which companies are often unable or unwilling to meet. Here are some of the requirements that serve as friction points for business owners:
1. High Risk
The risks of offering BNPL are significantly higher for B2B companies than for B2C online stores. This is mainly due to the substantially higher order amounts in B2B: The average order value (AOV) in B2B is seven times higher than that of B2C companies. The majority of private customers in Germany report that they buy goods worth less than a hundred euros per order on average, whereas the sums in B2B often run into the thousands. As such, a delay in payment has a much greater impact on the cash flow of a B2B company.
In addition to payment delays, fraud can also threaten the existence of B2B companies. Around 80% of B2B companies surveyed in the AFP Payments Fraud & Control Survey have already lost money due to fraud. Fraud involving fake identities is particularly rampant. When fraudsters purchase goods on account using false data, the damage can amount to immense sums.
Therefore, a comprehensive risk check before purchasing on account is essential in the B2B sector. However, risk checks for B2B are much more time-consuming than in B2C, especially when it comes to new customers or guest orders.
2. Complex processes
In B2C online stores, individuals make purchases, all of whom have the same legal conditions. This means B2C online stores can easily offer purchases on account and other BNPL solutions to all customers. In contrast, a B2B online store that wants to provide BNPL to as many potential buyers as possible must serve up to 14 different types of company structures have to be served.
As already mentioned, B2B trade orders usually involve significantly higher purchase amounts. Accordingly, high purchase limits must also be guaranteed – for trade customers, this can mean >100,00 pounds per order.
The manual accounting effort associated with offering BNPL payment methods to business customers is significantly higher in B2B. According to a survey of financial experts, 50% of B2B companies spend up to 10 hours per month managing payments – time they could also invest elsewhere on other important business priorities. And that's just the time spent on payments. There are also other operational tasks like setting up accounts for business customers and performing identity and credit checks that require time, effort and resources.
Why BNPL makes sense for B2B trade customers
The ability to buy first and pay later by invoice or installments is very convenient and readily accepted by B2C buyers. However, the consumer advice center warns consumers not to use this option too often: There is a danger of "placing more and more orders, even though the purchases may exceed one's budget."
In the B2B sector, however, the danger of over-indebtedness through BNPL does not exist. In fact, the opposite is true: for B2B companies, invoice purchasing can be a game-changer when it comes to competitiveness.
1. Improved liquidity
Unlike private consumers, companies often make purchases to earn money with the products later. For example, a doctor buys an X-ray machine for work. However, the equipment is costly. Before the doctor can earn money from the X-ray machine, they have a big hole in their budget due to the purchase of the X-ray machine. If he buys the device on account, he can receive the device, test it and perform the first examinations before transferring the amount for the device to the dealer*.
2. Faster availability
The payment process in a web store usually takes seconds for private customers. On the other hand, the payment process can take several days for trade customers, as individual steps are often carried out manually. However, it is still important to complete the purchase quickly so that companies can obtain the products they need for their business as soon as possible. A BNPL solution with real-time approval solves this problem, enabling B2B companies to enjoy faster and more flexible ordering processes.
B2B buyer expectations: A payment process just like B2C
The requirements and challenges for B2B BNPL are significantly higher than in B2C online stores. Nevertheless, buyers today have high expectations of the payment process. They want a B2C-like experience when buying for their company and nothing less.
1. The buyers’ journey starts online
In today's world, B2B buyers first search for information, opportunities, and prices online before making a purchase. More than 70% of B2B trade customers find buying from a website more convenient than buying from a sales representative. B2B buyers seek innovation and want a smooth, frictionless buying process.
2. Flexibility in payment
B2B buyers* want the ability to choose their preferred payment method and payment conditions when making business purchases. This means a successful B2B checkout must offer flexible payment solutions and payment terms to satisfy buyers and achieve high conversion and retention rates.
3. Fast order process
Ideally, the checkout process should be as fast as those experienced in B2C online stores. If B2B buyers have to wait days for approval to purchase on account, there’s a good chance they’ll abandon the purchase and shop with the competition. That’s why risk checks ideally need to be real-time.
How B2B businesses can securely implement BNPL in their online store
B2B merchants and marketplaces that want to integrate BNPL solutions into their online store checkout have two options: They can work with an in-house solution or use an external BNPL provider.
An external BNPL specialist is worthwhile for companies with numerous active trade customers who purchase at higher amounts and have different payment requirements. An external provider also makes sense for B2B online stores that want to offer BNPL to new customers and guest buyers in addition to existing customers. B2B online stores can pass on the risk and the additional effort to the BNPL provider and still benefit from satisfied customers and a higher conversion rate.