BNPL in B2B E-Commerce: Integrating Business Risk Management for Success

Business-to-business merchants – of all shapes and sizes and from all industrial sectors – have been living through a procurement revolution during the past three years.

Propelled by the efficiencies of e-commerce and by pandemic-altered business practices, their customers have been shifting rapidly away from traditional sales channels to digital self-service. And this is by no means just a small-business phenomenon. Around 35% of all B2B purchases by large and mid-sized businesses are now made directly online – and when orders that are agreed virtually are added on top, that figure jumps to around 70%.¹

Even in areas where field-sales models have traditionally dominated, such as pharma and medical equipment, in-person interactions have declined sharply. The trend is set to continue as the B2B e-commerce market is expected to soar at a compound annual growth rate of 17% throughout this decade.

And for good reasons. Identifying and researching new suppliers and products online has not only become much easier but undeniably more effective as customers increasingly trust e-channels and their capacity for order fulfilment. Indeed, e-merchants argue that the wider global markets afforded them by e-commerce creates a much more competitive landscape.

Even before Covid-19 changed purchasing patterns, B2B customers (especially those from younger cohorts) were valuing the user experience, the speed and the convenience of well-structured e-commerce websites. And today, three-quarters (74%) believe that the new web-dominated buying model makes their business more effective.²

It's not just a question of greater transaction volumes: the amouts that B2B customers are willing to spend online is also rising fast. The average order value of B2B customers has almost trebled in the past 10 years to €1,200-1,300. ³ As management consultants at McKinsey observe: “The most notable sign that digital sales have come of age is the comfort B2B buyers display in making large new purchases and reorders online.

Despite this rapid growth, the payment experience offered to companies purchasing goods online is far from optimal in several important ways – ways that jar with practices that have underpinned trade for many hundreds of years.

The vast majority of e-merchants in the B2B space today expect immediate, upfront card payment for new purchases, with only a small fraction able to provide the kind of deferred payment options that are the hallmark of B2B trade – from ‘payment on invoice’ to spread or split payments.

The anomaly has perhaps become even more pronounced as a result of the high-profile rise in recent years of Buy Now, Pay Later (BNPL) in consumer finance, offered by the likes of Klarna, Amazon, PayPal and some major credit card companies and banks.

That lack of flexible payment terms is keenly felt among your B2B customers. An estimated 95% say they prefer to pay on invoice, yet the bulk of the B2B websites they buy from expect payment in full at checkout. ⁴

In the world of B2B trade, this represents lost opportunity for e-merchants. There is plenty of evidence to show that the inability to offer financing to customers causes online buyers to think twice about the timing and affordability of their purchases – especially major ones. Indeed, different estimates suggest that between 30% and 50% of B2B buyers have abandoned orders at checkout having found out that the only option was to pay by card.⁵

That situation presents a new competitive opportunity to e-merchants: many customers are now not only searching online for the product or service their business requires but also for a related buying package that will allow them to defer payment and so help their business’s cash flow.

Such arguments for Buy Now, Pay Later for business are only being amplified by today’s challenging economic climate. Higher inflation and interest rates coupled with slow or negative growth in many economies mean the option of spreading or deferring payments becomes increasingly attractive.

The key to such an E-Commerce Credit Insurance facility is great customer experience:

• A B2B BNPL facility needs to look and feel as if it is part of an e-merchant’s website by providing ‘BNPL as a service’ through an application programming interface (API) that creates a seamless connection to our service.

• To enhance that customer experience, it needs to be able to provide instant decision-making on financing options, by making real-time checks on online buyers’ credit statuses as they move through checkout. The creditworthiness of customers is assessed in real time so they can be offered the most suitable payment terms as soon as they validate their basket.

• And critically, e-merchants can rest assured that the credit facilities being extended to customers will not impact their cash flow. By backing deferred payment solutions with credit insurance, alongside a BNPL platform provider or a bank, e-merchants are paid immediately as transactions are executed, with the task of collecting on non-payment handled through the expertise and local market knowledge of the credit insurance partner. For your business, that all happens behind the scenes as the credit insurance and payments processes are integrated and automated.

Building Financial Resilience Through B2B E-commerce Financing

A key objective of business risk management is to establish financial resilience, particularly in the face of evolving market conditions. E-commerce credit insurance, an integral part of the BNPL solution, contributes significantly to this goal. It does so by safeguarding your business against the unexpected losses that may arise from payment defaults. Showcasing case studies or data highlighting the effectiveness of trade credit insurance can provide compelling evidence of how it enhances a company's financial stability. This aspect of risk management is not just about protecting against losses; it's about empowering businesses to confidently explore broader markets and engage in higher-value transactions, knowing they have a safety net in place.

As the world leader in trade credit insurance, we are always protecting your cash flow, and for those of you who need instant financing of your invoice, we are partnering with major banks and pioneers in B2B BNPL technology in key countries and regions around the world (including Two, Pledg, PausePay) to allow you to turn customers’ expectations for Buy Now, Pay Later into revenue opportunities.

See the press release:  BNPL Partnership : Allianz Trade x Two x Santander

Here is how that might look in practice. As a customer fills their basket on your website, their financial health is analyzed in real time by connecting to our global databases of business creditworthiness, which contain financial, strategic and commercial information on more than 80 million companies worldwide. That seamless integration with your e-commerce system and the speed of the analysis provides an instantaneous and robust credit decision, allowing you to offer the most suitable credit terms.

Our solution can help to leverage BNPL in three distinct ways :

• By setting up direct integration between your website and our global network of company intelligence, you can immediately start to offer traditional credit terms, such as net 30 days. We assume the responsibility for collecting on any non-payments.

• Small and mid-sized businesses who would prefer to receive full payment immediately as customer transactions execute can use one of our B2B BNPL platform partners, such as Two or PausePay, with Allianz Trade dealing with any non-payment issues.

• For multinationals seeking a multi-country, multi-currency BNPL solution, we have created partnerships with financial services providers such as Santander Corporate & Investment Banking. That means the bank automatically pays you the full transaction value as the customer checks out and you don’t have to worry about any non-payment issues – no matter the location of your customer.