Estimated to account for about $100 billion worth of transactions each year, the buy now, pay later (BNPL) market has exploded in recent years, fueling and accelerating the transformation in consumer payments through point-of-sale financing.
But while the business-to-consumer (B2C) sector has experienced tremendous growth over the years, the same cannot be said for business-to-business (B2B) payments, according to Matthias Knecht, co-founder and co-CEO of Berlin-based BNPL firm Billie.
“The consumer world has been completely transformed over the last 15 years. However, if you turn to the business sector, B2B payments are still stuck somewhere in the 90s,” Knecht told PYMNTS in a recent interview.
He said most business transactions take place via pen and paper or even with fax or mail orders, and when it comes to BNPL, no global or European provider has been able to offer businesses a modern and digitized solution like what companies such as Klarna have done in the consumer space.
It’s a hole Billie has been looking to plug in the B2B space since it was founded in 2016, working bring the decades-old BNPL solution into the 21st century for small and medium-sized businesses (SMBs) by “consumerizing the business shopping experience” and removing the bottlenecks that have been built into the traditional B2B payment and purchasing experience.
From transforming the accounts receivable and working capital management space for merchants through its Billie Flow product to offering business customers a BNPL product on par with “the consumer BNPL product that we’re all familiar with,” Knecht said the firm is creating the optimal merchant experience with the highest checkout conversion rate possible — up to 95%.
Becoming the ‘Klarna’ of B2B BNPL
The German FinTech recently inked a global partnership deal with Swedish BNPL giant Klarna — “the undisputed champion in the B2C world,” according to Knecht — that will see the two firms integrate their services so that merchants worldwide who already have a Klarna installation and integration can easily toggle on the Billie payment method for their B2B checkout.
“It’s a very complementary product offering; Klarna will cover the B2C side and Billie will go through the current infrastructure and offer the B2B payment method that Klarna customers can use,” he explained.
This collaboration, he added, eliminates the biggest obstacle to acquiring customers — integration with the online merchant — as shops are likely to already have fully packed development engineering roadmaps and are not waiting for the next provider to try to make inroads into the checkout.
“If you can use a standing infrastructure that is already integrated with smartphones and basically just hop on it and provide your services to these merchants, that’s just fantastic, and it simplifies your onboarding experience,” he said.
Broadening Billie’s Reach
On the back of a $100 million funding round last October that valued the Berlin-based FinTech firm at $640 million, Knecht said one of its biggest priorities this year is to expand across Europe beyond its core German market where Billie has been proven to be a viable product.
Read more: B2B BNPL Platform Billie Closes $100M Funding at $640M Valuation
“I firmly believe the need for this kind of product is ubiquitous — it’s just everywhere. You’re looking at the buyers and the challenges these business buyers have and it’s just the same in every country,” he said.
And as the firm target new markets, several variables will have to be taken into consideration such as market size, ease of entry, competitive dynamics and the regulatory environment. When it comes to the type of licensing structure, some countries may require a full banking license, while others may simply require a banking partner, Knecht said.
Another variable is the risk structure and the pricing structure, which differs across European countries. “Germany, for example, is a country which tends to have lower risk and lower prices [while in] other countries, the pricing structure and fee structure are a lot higher, but then again, you’re incurring higher default risk,” he explained, adding that balancing these differences is essential to make the market attractive.
And even though geographical expansion is top of the list moving forward, he said the company is hoping partnerships with Klarna and other firms will bear much fruit to spur business growth. “[We want to] see a lot of [their] customers using our payment method in their checkouts [so that] we can help them to have the smoothest B2B checkout [possible], very similar to the B2C experience.”
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