26 October 2022
While split payments or Buy Now Pay Later* (often called BNPL) have largely conquered B2C marketplaces, they were still timid in the B2B market. Now the trend seems to have reversed. Fintechs have realised they can do well by addressing the B2B market, where payment facilities are still far from being as modern as in B2C. Let’s take a closer look at a model that is becoming more popular.
If, until 2021, BNPL B2C players had been exhilarated by the volume of transactions on e-commerce platforms during the health crisis, it is clear that the model’s popularity seems to be in question. Between the rise in late payments, inflation, or micro-credit encouragement, BNPL B2C fintechs have to rethink their model by diversifying their offerings. In France, the sudden rise of the model and the lack of regulation have led the French government to look into these financing facilities, which, until now, have fallen under the radar of the consumer code, unlike traditional forms of credit. The Chassaing report in autumn 2021 warned that legislation on fractional payments was needed without delay.
On the B2B side, BNPL is on a roll! Payments between professionals do not meet the same challenges as in B2C. A B2B buyer will tend to commit the transaction not on the invoice date but at 30, 45 or 60 days. For merchants, the BNPL represents a boon to be paid immediately by the factor and to keep their working capital afloat. According to Malte Huffmann and Philipp Povel, CEOs of Mondo, a US B2B BNPL solution, the concept of deferred payment in B2B is not new but has increased with the rise of digitalization. In Europe and the United States alone, the market could represent an opportunity of nearly 200 billion dollars!
Unlike B2C solutions, B2B BNPL has no purely “consumerist” interest. It does not help companies to consume more but rather to free up cash to finance their growth. According to Louis Carbonnier, co-founder and co-CEO of Hokodo, a Franco-British player in B2B BNPL, “professionals are demanding better services as online sales continue to gain ground in B2B. The modernization of B2B payments is a topic that is still far from being fully exploited. In France, however, players such as Defacto and Alma have seen the opportunities of these financing facilities. Specialising in BNPL, these fintechs offer financing methods such as factoring or bank discounting.
The constraints are more extensive than in B2C. The amounts are much higher between a business basket and a private basket, which implies more sustained checks on the creditworthiness of debtors.
The digitization of payment methods allows BNPL players to set up recurring payment methods, mainly by direct debit. Thanks to Lemonway technology, BNPL funders can have direct debit mandates electronically signed by the financed professionals and then call the funds in due course via the Lemonway API.
BNPL fintechs are looking for technology partners who will follow them in their growth. The notion of scalability is a significant issue that Lemonway responds to by offering its clients an adaptable solution in a tailor-made payment environment. Each company and each platform have its technical set-up. Lemonway’s particularity is to deliver a customized flow scheme that evolves according to the client’s activity.
Take the example of a BNPL fintech in France, which mainly focuses on B2B financing and wants to extend its expertise to B2C platforms in Europe. It can count on Lemonway’s financing experience and flexibility to offer various payment methods in multiple currencies.
For the past 10 years, Lemonway has supported European fintechs specializing in retail and professional finance. Its knowledge of the market and business issues makes it a partner of choice. In addition to the technical expertise provided by the project managers at the time of the solution’s onboarding, Lemonway stands out for the daily and privileged follow-up provided to each client over the long term. It supports fintechs on compliance and the diversity of payment methods according to our client’s needs. Then comes the reconciliation of the flows and the collection, which are automated thanks to the Lemonway API, thus freeing up internal resources on the fintech side to focus on their core business.
As a pan-European payment service provider, Lemonway supports B2B BNPL fintechs in automating their flows. You are a B2B fintech offering BNPL to your customers, and you can’t manage the transaction volumes? Take advantage of our expert advice to maximize your chances of success! Contact us now!
*Authorized provider of credit transactions
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