Buy now, pay later (BNPL) transaction volume is expected to reach $680 billion worldwide by 2025, a clear indication that consumers will continue to embrace installment payments and adopt the service at the point of sale (POS).
Read PYMNTS report: Who’s Using BNPL and Why?
But while the business-to-consumer (B2C) sector has experienced tremendous growth in recent years, Jamie Beaumont, CEO at U.K.-based BNPL firm Playter, tells PYMNTS that the trend of simply copy-pasting the B2C model into the business-to-business (B2B) space is an uninformed strategy decision that does not meet the needs of small- and medium-sized enterprises (SMEs).
“[The B2B trend has been] to stick the product on a checkout so that when a business goes to purchase a product, they’ll be able to split the cost over 30 or 60 days,” Beaumont told PYMNTS in an interview. “But that’s not how businesses buy,” he said, adding that online purchases are rare in the B2B space so the replication of the B2C model doesn’t create value for businesses.
It’s the reason why Playter has bucked that trend, he explained, choosing instead to create a platform that enables merchants to take ownership of BNPL and instantly spread unpaid invoices over six to 12 months installments, while their suppliers get paid within 24 hours.
Read more: B2B BNPL Platform Playter Raises $1.7M
“It’s a very different approach [from traditional BNPL for businesses]. It’s almost like post-purchase, where we give all the control and optionality of how people pay and how long the terms are to the businesses paying,” Beaumont noted. “That obviously is a huge benefit to the supplier who’s looking to get paid within a 24-hour period as well.”
Open Banking Key to B2B Lending
As with any lending model, he acknowledged the significant risks involved, stressing the need to ensure they are backing the right firms — especially when lending up to £500,000 at a time — “because if you get one wrong, it’s a big fish to go under.”
He also pointed to the “bad picture” credit bureaus have of SMEs when underwriting, resulting in a significant number of loan rejections because the funding decisions are made based on outdated data.
Playter, on the other hand, leverages open banking and integrates with 95% of accounting providers, drawing down on that data in addition to external sources such as credit ratings to make informed lending decisions.
And for a monthly subscription fee starting from £550 ($674), merchant clients can access up to £300,000 (about $368,000) in 24 hours with no interest costs, margins, fees, and no revenue sharing necessary.
“We’re the only business in the world working with B2B [firms] that helps them get funded. [They] just need to pay a software cost to access our platform, which then gives you the ability to access the funding,” Beaumont explained.
Elsewhere, he touched on the intensifying calls for BNPL regulation in their U.K. home turf, and the recent move by the Financial Conduct Authority (FCA) to push major BNPL Firms — Clearpay, Klarna, Laybuy and Openpay — to update contract terms and address its concerns about protecting customers.
Beaumont said while these regulatory steps have a lesser impact on the B2B lending market, it won’t be long before the FCA turns its attention to the business space. Until then, industry players who have nothing to hide have no cause for alarm and can even take the necessary steps to self-regulate in anticipation of any future regulatory obligations.
Niche BNPL Model Is New Trend
Looking ahead, Beaumont pointed to niche models such as Fly Now, Pay Later, a BNPL service for air travel, and BNPL for spreading wedding costs, as a growing trend that will continue to shape the sector in the months and years to come.
“There’s a lot of niching down and focusing on particular pain points,” he said, although he explained that it is more evident in the B2C space but more difficult to do in the business market because there are so many pain points to tackle.
It’s the reason why after launching as a Hire Now, Pay Later platform in July last year focused solely on helping small businesses split recruitment agency fees, the U.K. firm has now opened up to a huge array of different fees that businesses want to split, he remarked.
Learn more: BNPL Finds A Niche In Small Business Hiring
He went on to reference industry players such as Resolve and Hokodo that have been successful in copy-pasting the B2C model into the B2B space, while providing huge value to the businesses that need services. “But we are the complete opposite side of the coin, and it’s going quite well,” he said.
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