Improving conversion rates, higher average cart value, fewer cart abandonments are the trends B2B webshop owners dream of. They are the exact benefits offered by the latest form of short-term financing: “Buy Now, Pay Later” (BNPL). But what is this new service really about? What does BNPL mean in practice? What benefits does it offer you as an e-merchant in the B2B market? And what about its risks?

Our comprehensive guide will answer all your questions.

‘Buy Now Pay Later’ as a new form of payment for eCommerce webshops – What is it about?

The concept of deferred payment sounds familiar to all B2B e-merchants. The method of customers paying the price of a purchase in installments has been common and popular globally for a long time, both in the B2B and B2C markets. So the question is: what is new about BNLP, and how does it change the meaning of deferred payment?

BNPL is the acronym for “Buy Now, Pay Later.”

You may rightly think that it is just another definition of a deferred payment solution.

What is new?

BNPL is a service rewired using digital technology. The innovation makes installment payment instantly available through new service providers, integrated into the online shopping process. The service is available free of interest and default charges in most cases. BNPL makes the user journey much simpler, elevating the customer experience.

Once the integration is complete, the transactions will be similar to a simple card payment for merchants: they will get their money immediately, financed by the BNPL provider.

Is BNPL like credit card payment, then?

Well, not exactly.

The most important thing to know is that if you sign a contract with BNPL provider PastPay, the underlying method of financing is factoring rather than a loan. The service will be free of charge for your customers. Only your webshop will have to pay a very low BNPL charge. PastPay will transfer your webshop the invoice value right after the purchase, and your customer will have to pay the invoice to PastPay by the prolonged payment date. Using this service, your webshop will also save the charge of bank card payment – besides enjoying BNPL’s other benefits. (Please read about the process of BNPL in detail below.)

In light of the above, please find an overview of the key differences between BNPL and credit cards below.

Application

You can apply for using BNPL much faster and simpler than for a credit card. When someone applies for a credit card, the bank will assess the applicant’s creditworthiness, income, and debt status in a lengthy procedure. It can take several weeks for a decision to be made. The ‘Buy Now, Pay Later’ payment option, on the other hand, is instantly available. Customers can access the BNPL option on the checkout page of the webshop with a few clicks, in a few seconds. Unlike with a credit card, applying for BNPL will not reduce the customer’s credit line as it doesn’t qualify as a loan.

Charges

One of the most important differences between a credit card and BNPL is that the latter is available without interest and default charges – practically free of charge – if payment is made on time. On the other hand, credit card holders have to pay interest, annual, and other charges. As a result, BNPL is a more predictable payment solution.

Acceptance

A key benefit of credit card payment is that credit cards are accepted anywhere in the world and can be used both online and offline. BNPL, on the other hand, can only be used in webshops and shops that have signed a contract with a BNPL provider.

No wonder BNPL service has entered the B2B market

It is certainly worth mentioning that BNPL has seen significant growth worldwide over recent years. For example, in the United Kingdom, the ratio of customers using BNPL service increased from 6% to 18% between 2019 and 2021. Australia also saw impressive growth, with the ratio of BNPL users rising by more than 10% in the same period. In the United States, the ratio of BNPL users was up from 25% to 31% last year alone.

Given the global success of BNPL, it is not surprising that the service has recently entered the B2B eCommerce market as well. The pandemic has also accelerated the adoption of BNPL in this segment. Both consumer and business e-payment and eCommerce have grown significantly due to Covid-19. Juniper Research puts the value of the B2B transaction market at USD 84bn facilitating the launch of new payment schemes offering more favorable terms and attractive benefits. Consequently, BNPL is a great tool to finance your working capital.

The benefits of BNPL for B2B e-merchants

Offering BNPL as a payment option provides major benefits to B2B webshop owners:

1. Improving conversion rates

Being a webshop owner, you are probably familiar with the challenges of the customer journey from the home page to checkout. You may lose up to 80 to 90% of your customers between these two points.

It is the checkout page where churn typically happens, with limited payment options and complicated payment processes being the main pain points.

The fast, simple, and secure BNPL process can efficiently improve abandonment rates. Moreover, BNPL allows you to sell products considered too expensive by your customers before. Research shows that BNPL can improve webshops’ conversion rates by up to 20 to 30%.

2. Increasing cart value

Several research projects have shown that BNPL leads to higher cart value in the B2C market. According to Forbes, customers spend 10 to 40% more using the BNPL payment option over credit card payment. An Ally Lending executive even believes that you can double cart value by offering the BNPL option.

Although growth of this magnitude is somewhat less common with B2B transactions, businesses, like consumers, also prefer the BNPL service thanks to its flexibility and simplicity.

3. Engaging new customers

Since BNPL allows businesses to purchase the required assets without spending precious working capital, they consider it an attractive option. BNPL makes life easier also for businesses struggling with liquidity issues due to the pandemic.

The comfortable, flexible, and transparent payment provided by BNPL also promotes customer engagement. Return customers are very valuable for any B2B webshop. They are more likely to convert, can generate an up to three times higher average cart value, and make purchases much more frequently than first-time webshop visitors.

4. Reducing customer risk

Since BNPL providers check your customers’ creditworthiness, they can give you valuable feedback about your partners’ financial standing. Moreover, service providers typically protect you from the risk of non-payment too.

Would you be interested in adding BNPL to your B2B webshop?

Get in touch with our BNPL specialist for a free consultation!

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What about the risks of BNPL?

Based on the above, offering a BNPL option is a simple and efficient solution for B2B webshops taking even the risk of financing off their shoulders.

Please note, however, that BNPL is not a silver bullet.

What about the risks to account for?

One of the drawbacks of BNPL is that some service providers may charge not only a transaction fee but also additional fees (e.g., monthly or other subscription fees).

Webshop owners should also be aware that BNPL may encourage reckless buying. Driven by flexible payment terms, some B2B players may neglect to track their inventories and overspend. In such a case, your customer may not even realize the problem, as they may seem to have an appropriate level of liquidity in the short run. But with the payment date approaching, settlement may cause serious financial issues and may even lead to a debt spiral. A prudent BNPL provider, however, protects you from the risks by screening businesses prone to overspending in advance. This way, your webshop will not face the above threat.

However, it may be an issue if the BNPL provider is unable to evaluate your customers during the application process appropriately. The good news is that BNPL provider PastPay can check your customers’ creditworthiness in seconds using its smart solutions. And as mentioned above, it even protects you from the risk of non-payment. As a result, all you need to do about using BNPL is to manage integration and accept high-value orders from new partners on your webshop with peace of mind.

For more details about the above, please read our article about the benefits and drawbacks of BNPL.

The BNPL process

Now that you are familiar with the meaning of BNPL, its benefits, and drawbacks, let’s take a closer look at the process from a B2B webshop’s perspective.

For customers signing a contract with BNPL provider PastPay, the steps of BNPL are as follows:

1. A potential customer visits your webshop. Let’s assume they put products in their cart at a value of € 1,000 and then click on the “Payment” button.
2. Of the payment options listed on the checkout page, they select “Buy Now, Pay Later.”
3. Your webshop sends the customer’s tax ID no. to PastPay in the background, based on which it performs the necessary checks. The customer gets confirmation about their compliance with the terms and conditions of using BNPL in a few seconds, without even leaving your page.
4. If your customer gets a green light, they can access the BNPL service and the rules and detailed terms of using it immediately. If your customer accepts the terms of the contract, your webshop can automatically issue an invoice with a longer payment period.
5. The invoice is automatically sent to PastPay through the integration.
6. Based on the invoice, we automatically pay 100% of the invoice value, € 1,000 in this case, to your webshop immediately.
7. At the payment deadline, the customer pays the invoice in one lump sum.

BNPL in the B2C and B2B markets: What’s the difference?

Seeing the fast-paced adoption of BNPL, you may wonder whether BNPL works the same way for the B2B and B2C markets. Or are they two entirely different worlds?

As you probably know, the underlying processes behind B2B transactions are a lot more complex than those behind B2C purchases. More parties are involved in the decision-making process, and ideas, needs, and suggestions need to be managed in an iterative, multi-phase process. It doesn’t come as a surprise, given that the amount spent on a B2B purchase might be ten times higher than that of a typical B2C transaction. The payment term also tends to be much longer when compared to the B2C market. A supplier may have to wait months for their money to arrive, resulting in different financing considerations, preferences, and opportunities in BNPL services.

Moreover, even the concept of a B2B purchase is complex. For example, it may involve a private entrepreneur, a limited liability company, a school or a hospital, etc. Consequently, a business transaction requires a more thorough evaluation than a consumer purchase.

Buy Now Pay Later – What does the future hold?

You are probably interested to know whether BNPL is just a fad or a key ingredient of successful webshops in the long run?

Forecasts show that BNPL will be a dominant trend also in the years to come. According to Juniper Research, BNPL services will account for 24% of global eCommerce transactions in terms of the value of physical goods by 2026, which marks a significant increase from last year’s 9%.

Based on research results, BNPL is currently a preferred payment option for higher-value orders. By 2026, however, it is likely to become a popular option with lower-value purchases.

Forecasts put the number of people using BNPL solutions at 1.5bn by 2026. Back in 2021, this was only 340 million, which means a more than 300% increase in the number of users. Therefore, the research stresses that webshops should implement the new payment option as soon as possible if they want to stay ahead of their competitors.

BNPL from PastPay

It’s good news that the BNPL service is already available to B2B webshops in the CEE region. PastPay is the first BNPL provider in the region, offering an attractive, powerful, and future-proof solution to your webshop and your customers:

• As a result of automatic risk assessment, we are able to check your customer’s creditworthiness in a matter of seconds. This not only makes the user experience smoother but also provides you with valuable and accurate feedback on customer risk. To maximize your security, we even protect you from the risk of non-payment.

• You should expect similar or even lower costs than your current payment options. With a payment term of 30 days, your total cost will be only 2 to 3% of the invoice amount.

• By signing a contract with PastPay, you can also expect to save significant resources and reduce administration since we enable you to fully outsource the management of your payment records. If your customer defaults on payment or fails to pay, we also manage the collection process for you.

• In addition, we’ll help you create a transparent and customizable customer experience. It’s up to you to set the maximum payment term, draft collection messages, and specify other parameters. You’ll also have full visibility of the entire process: our integration allows you to check payment history and status at any time.
• Easy integration is the icing on the cake. Our BNPL solution can be easily integrated via an API next to other payment options with your checkout system. And if you decide to suspend BNPL later, you can switch the service off temporarily or for good with the push of a button.

Summary

BNPL’s innovation is to integrate deferred payment into the online shopping process using a new type of service provider instantly. BNPL enables your customers to buy products free of interest, provided that they pay in instalments. The service makes the user journey significantly simpler, enhancing the customer experience. It’s not surprising that this service has been gaining ground also in the B2B eCommerce market recently.

Suppose you want to improve your conversion rates, increase your cart value, reduce your abandonment rates, and turn shoppers into long-term and loyal customers. In that case, you should implement this solution on your webshop as soon as possible. Those who offer the BNPL service to their customers first will gain a competitive edge and win market share from their rivals.

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