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Over the past few years, BNPL (Buy Now Pay Later) has become the fastest growing payment solution in the B2C market. Consumer-focused companies like Affirm, Klarna, Zip and AfterPay have become household names that have integrated with big retailers like Amazon and Walmart.
What is the common thread between all these companies? Instant, streamlined consumer credit approval (usually integrated with checkout) paves the way for breaking down purchases into installments.
BNPL’s payment options are attractive to consumers as it is common for desired purchases to exceed their monthly cash flow. For example, a brand-new exercise bike might not be part of a consumer’s monthly budget, but when it’s broken down into multiple installments, it becomes easier to pay for and puts less pressure on a consumer’s budget. housework.
Merchants who offer these payment options experience increased growth through average order size, higher conversion rates (especially with more expensive items), and increased loyalty. Simply put, BNPL is increasing its revenue significantly.
With such a high adoption rate in consumer markets, it’s no surprise that BNPL has begun to trickle into the B2B world as an easy way out for old-school payment providers and outdated lenders. to explain what they are doing. Unfortunately, existing solutions fall far short of what customers expect from BNPL and are becoming quite confusing to distinguish between B2B payment options, with many companies misclassifying themselves as a BNPL offering.
Let’s dive into some of the most frequently asked questions about B2B BNPL payment options.
Is it instant approval?
Not minutes, not hours, and certainly not days; One of the main reasons consumers love BNPL offers is that purchase approvals are instantaneous. Consumers these days expect fast service, and that applies to their payment options as well. To qualify as a BNPL offer, instant approval is not an advantage, but rather table stakes.
Very few vendors in the B2B market meet this requirement, and most have approval times ranging from 24 to 48 hours. While this may be faster than most in-house credit programs, it’s a far cry from the instant approval that top BNPL providers offer.
How fast is the app?
In addition to the speed of approval, the time required to process an application is a critical factor. A BNPL B2C offer asks minimal questions to quickly help consumers navigate through the process and reduce cart abandonment. The same goes for B2B; if an application takes a long time to complete, chances are the buyer will walk away. In fact, “80% of customers say the experience a company provides is as important as the products and services it offers.”
Are there easy-to-understand payment options?
Any BNLP payment option must break down purchases into single payments. For B2C, this is typically executed with a “4 interest free payments” product payment plan or offering monthly installments for up to 12 months.
In the B2B world, payment plans are much less common. Typically, a net terms program charges the full invoice amount and payment is due within a specific time frame (usually 30 or 60 days). Although longer payment terms are more common in equipment lease and finance contracts, these terms are generally between 12 and 60 months.
Is it available wherever a customer shops?
In e-commerce, high conversion rates are essential for success. This means turning website visitors into customers and preventing visitors from abandoning a site in the middle of payment. Companies like Affirm and Klarna understand that integrating payment options seamlessly into the checkout process is essential to ensure customers stay on site for instant approval and complete their checkout process.
For retail sellers, the same rules apply. If they’re on the phone with a customer or in a store, they can’t afford to wait hours or days to see if a customer is approved. They need simple, elegant solutions that integrate seamlessly with how they sell and how customers buy, regardless of channel.
In B2B, the same strategy should apply. This is all the more critical as most B2B sales today take place offline over the phone or in the field. Even less time is available to complete a traditional request, let alone “wait” 48 hours for a decision – B2B customers need the product for the job now!
Typical businesses spend 10-40% on their sales and marketing costs. The last thing anyone wants is for that money to be wasted by making a prospect or customer leave because they couldn’t complete the transaction.
So what can BNPL do for B2B companies?
As mentioned earlier, BNPL solutions provide businesses with increased growth in average order values (AOV), conversion rates, and customer loyalty. In B2C, this growth is usually calculated by comparing the average rates of the size of B2C orders placed through BNPL versus credit cards.
A standard net terms program saw AOV increase by up to 30% compared to a cash on delivery or credit card transaction. Although this is a big increase, BNPL services offer a much larger increase in order size. Credit Key reported that some customers were even reaching 10 times the average order size compared to a credit card or cash on delivery payment method.
When you look closely beyond marketing, very few B2B payment options meet the multiple basic requirements needed to be considered a true BNPL payment option. They are not instant, have long applications, offer installments or significantly increase AOV.
While many providers offer 30, 60 or 90 day deferred payments, this is not flexible enough to meet the needs of today’s business customers. Data from Credit Key shows that many business customers prefer terms of six months or longer.
Credit Key is a B2B BNPL pioneer with instant credit approvals wherever purchases are made up to $50,000. Integrating seamlessly with e-commerce, phone and in-store checkouts, Credit Key delivers a superior customer experience that can dramatically increase AOV, conversion rates, and order frequency.
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