BNPL 101: Understanding the Differences Between B2C and B2B

Are you tired of feeling financially constrained whenever you want to purchase? Look no further than Buy Now Pay Later (BNPL) – also called a point–of-sales loan – the payment method that’s taking the retail and business world by storm. With BNPL, you can buy what you need and pay for it later, typically within a few weeks or months.

Key takeaways

1. BNPL for consumer transactions, or B2C BNPL, is designed for individual consumers and generally includes smaller purchases. In contrast, BNPL for business transactions, or B2B BNPL, is intended for companies and typically includes larger transactions.
   
2. BNPL is a popular payment method that is growing in popularity as an alternative to traditional payment methods like credit and debit cards. Retailers and wholesalers benefit from increased sales and improved customer loyalty due to BNPL.
   
3. Juniper Research predicts that the use of BNPL will continue to grow, with the number of users surpassing 900 million by 2027. As an innovative and promising payment method, BNPL is expected to have a lasting impact on retail and business.

So, what’s the deal with BNPL? Well, it’s been gaining popularity in recent years as an alternative to traditional payment methods like credit and debit cards. But it’s not just great for cash-strapped customers; retailers and wholesalers are also reaping the benefits of increased sales and improved customer loyalty. According to Worldpay, in 2020, BNPL accounted for 2.9% of global eCommerce transaction value, expected to reach a 5.3% share by 2025.

In this blog post, we will explore the history and current state of BNPL in both the B2C and B2B markets and how it is changing the landscape for online retailers.

BNPL is shaking up online shopping

Let’s dive deeper into the history and current state of BNPL.

The history of BNPL in the B2C market can be traced back to the early 2000s when companies like BillMeLater and PayPal Credit began offering consumers the ability to make purchases now and pay later. These pioneers of BNPL paved the way for the growth of this payment method. However, in the last few years, BNPL truly gained popularity. Companies such as Klarna, Afterpay, and Laybuy have been instrumental in driving the growth of BNPL.

One of the key players in this space has been Klarna, a Swedish company that has rapidly expanded across Europe and the United States. Klarna’s success can be attributed to its user-friendly interface and flexible payment plans. Additionally, it has partnerships with a wide range of retailers, which has helped to increase its visibility and popularity among consumers. Afterpay and Laybuy have also gained popularity, particularly in Australia and New Zealand.

For instance, fashion retailer ASOS has seen an increase in sales after introducing Klarna as a payment option. In addition, ASOS’s CEO believes the company has positively impacted conversion rates and customer loyalty since implementing BNPL.

But what’s driving this BNPL boom? For one, the rise of eCommerce has made it easier for customers to shop online and for retailers to offer BNPL as a payment option. Economic uncertainty has also led more customers to seek flexible payment options. And let’s not forget the increase in mobile and digital payments, making BNPL more accessible than ever. One study from Juniper Research predicts that the number of BNPL users will increase 157% from 360 million in 2022 to 900 million by 2027. This growth is expected to be driven by an anticipated economic downturn and the increased demand for low-cost credit solutions.

BNPL has been popular in various industries, such as retail, travel, and healthcare. It has been particularly successful in the retail industry, as it allows customers to purchase items they may not be able to afford upfront. BNPL has allowed customers to book their dream holidays without breaking the bank in the travel industry. BNPL has been used in healthcare to finance medical procedures, such as dental and cosmetic treatments.

The rise and fall of Klarna

Klarna, a Swedish company rapidly expanding across Europe and the United States with 150 million active consumers, is one of the key players in the B2C BNPL space. The company started as a small eCommerce payment provider in 2005 and has grown to become one of the most popular BNPL providers in the world. Klarna’s success can be attributed to its user-friendly interface, flexible payment plans, and partnerships with a wide range of retailers.

However, despite its success, Klarna has faced some issues in the B2C BNPL space. The company has been criticized for its high fees and lack of transparency in its pricing. Additionally, some have raised concerns about the potential negative impact BNPL can have on consumers, particularly those with poor credit who may be more likely to fall into debt. Klarna has been accused of distributing bad credit and defaulting on them, which can negatively affect consumers.

In recent months, Klarna’s valuation has decreased. The drop is due to a combination of factors, including a change in consumer sentiment towards BNPL, increased competition from other BNPL providers, and regulatory pressure. Despite this decrease in valuation, Klarna has survived and continued to do business. The company has shifted its focus to the B2B market, which has been a more stable source of revenue.

BNPL entering the business-to-business market

While BNPL has been primarily associated with the B2C market, it is also starting to gain traction in the B2B space. This emergence of BNPL in the B2B market can be attributed to the growing popularity of eCommerce and the need for more flexible payment options. As a result, B2B eCommerce merchants have recognized the potential benefits of BNPL as a payment method and have started to offer it to their customers.

BNPL can be a powerful tool for B2B webshops selling to companies. By offering BNPL as a payment option, these retailers can increase sales and improve customer loyalty. The new payment solution allows businesses to purchase goods or services without paying upfront, which can be especially useful for small businesses or those with cash flow constraints. Additionally, BNPL can streamline businesses’ purchasing process by allowing them to make purchases now and pay later.

From the buyer’s side, BNPL can also benefit businesses as it allows companies to make purchases now and pay later, which can be especially useful for businesses with cash flow constraints. Additionally, BNPL can purchase large or expensive items, such as equipment or software, without paying upfront.

In the B2B market, software company Zuora has also seen success with BNPL. The company offers its customers the ability to subscribe to its software on a pay-as-you-go basis and has seen a significant increase in sales since introducing this option.

Another example of a B2B company using BNPL is the furniture retailer Wayfair. The company offers business customers the option to pay for their purchases over time, which has helped to increase sales and improve customer loyalty.

In conclusion, the emergence of BNPL in the B2B space benefits both buyers and sellers. B2B eCommerce merchants can increase sales and improve customer loyalty by offering BNPL as a payment option. Additionally, BNPL can streamline businesses’ purchasing process, allowing them to make purchases now and pay later. Finally, by making both the buyer and seller sides more liquid, BNPL can also benefit the economy by enabling businesses to make purchases and investments that they may not have been able to afford otherwise.

Key differences between B2C and B2B BNPL

There are some key differences when comparing B2C and B2B BNPL methods. B2C BNPL is geared towards individual consumers and typically involves smaller transactions. On the other hand, B2B BNPL is focused on providing payment solutions for businesses and typically involves larger transactions.

Application

In terms of application, B2C BNPL is mostly used in retail, travel, and healthcare sectors, where consumers can purchase items they may not be able to afford upfront. However, in the B2B market, BNPL is used in various industries, such as software, manufacturing, and wholesale.

Assumed risk

Another critical difference is the level of credit risk involved. B2C BNPL providers typically assume more credit risk because they are dealing with individual consumers, whereas B2B BNPL providers may have more insight into the creditworthiness of their business customers.

To sum up, B2C and B2B BNPL are two different payment methods, each targeting different market segments with different use cases and levels of credit risk. While B2C BNPL is more popular in retail and consumer-oriented industries, B2B BNPL is prevalent in business-oriented industries. Nevertheless, both methods have seen significant growth and have the potential to change the way payments are made in the future.

To sum things up about BNPL

So, there you have it, a snapshot of the world of BNPL. It’s an innovative payment method shaking up the retail and business landscape. Whether you’re an individual consumer or a business owner, BNPL is an option worth considering for your next purchase.

BNPL offers customers an alternative to traditional payment methods, such as credit cards or debit cards, allowing them to buy what they need now and pay later, which can be especially useful for those who are cash-strapped or have poor credit. This payment method can also benefit retailers by increasing sales and improving customer loyalty.

Companies such as Klarna, Afterpay, and Laybuy have been instrumental in driving the growth of BNPL in the B2C market. In the B2B market, companies like PastPay and Billie offer merchants the opportunity to add BNPL to their payment solutions in the checkout flow.

According to the forecast of Juniper Research, the number of BNPL users will surpass 900 million by 2027. BNPL is an exciting and innovative payment method that is here to stay and will continue to shape the retail and business landscape in the future.

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