Featured article by Bernadine Racoma, Content Manager of eTranslation Services
Buy now pay later (BNPL) is a payment method many of us have used before. Most people use it for one-off purchases that they can’t afford – some people get carried away with it. It’s a form of credit offered by creditors that means every purchase made is like a mini loan. Miss the payments, and it can affect your credit score.
It’s so popular that 4 in 10 people have used a BNPL later service using companies like Klarna, Clear Pay, and even PayPal has jumped on the bandwagon. Klarna is by far the most popular, with 460,000 active users. Recently, a company called Billie — a major BNPL provider for B2B businesses — gathered an extra $100 million in funding to support their market growth.
Click here to learn how BNPL might change B2B transactions forever.
How BNPL Typically Works
BNPL is a huge trend. Experts predict the market will be worth over $166 billion by the end of 2023. Over the last two years, BNPL has grown over 85%, fuelled by the pandemic and businesses struggling to find the funds to support their day-to-day running. BNPL offers a lifeline for people who need, or want, to make a purchase but don’t have the money available. One survey found the main reason people chose to use BNPL services is that they can spread the cost – and that’s exactly why B2B buyers decide to use it.
The B2B market is much bigger than B2C – it’s worth $1.8 trillion, to be precise. Big businesses are making big transactions, and partnering with a BNPL platform can open up the potential for more customers. Once a purchase happens, the reigns are handed over to the BNPL provider to chase the money. B2B traders get their money instantly – so it’s a win-win situation for you and your customers, as long as they can make the repayments.
How It Can Make A Business More Profitable
A BNPL scheme is more likely to attract businesses who are looking to shop only using BNPL. Many B2B businesses won’t be able to afford to make a transaction in one lump sum, especially B2B startups with little money. These new income streams stimulate people to purchase the big-ticket items they wouldn’t usually go for, and that’s where the benefits come in for a B2B brand.
Plus, these types of payment schemes can tie into reward schemes. There has been a lot of research into b2b sales incentives and their effectiveness, with one study concluding that 75% of B2B buyers favor brands that offer a rewards program. A loyalty program for b2b customers is another incentive to make those all-important big purchases. And, if you can create loyal customers, you’ll find they spend 43% more with you than other brands.
Both BNPL and a robust b2b customer loyalty programme are ways of improving the shopping experience. Consumers always have a problem they need solving, and one common problem is money. Take large payments out of the equation and still offer rewards, and you’re onto a winner.
The Downsides
The only real risks are to your customers.
There are downsides to most things in life, and BNPL comes with its defects – the main downside being the risk for the consumer. Yes, you as a business will always have your money for the transaction, but that doesn’t mean it’s something your consumers can afford – and you’d never find out about it. One recent study in the UK found that BNPL consumers have an average of $563 on credit – but that’s just B2C transactions. B2B transactions are typically much higher in value.
BNPL is definitely revolutionary – allowing people to shop as they have never been able to shop before. There’s conflict as to whether this is a good thing for the consumer as it does promote impulse spending, but for B2B brands, it’s more likely to offer a lifeline to keep the business going. Going back to the pandemic, many brands had no choice but to explore new avenues of financial aid to continue trading – BNPL became that lifeline.
Bernadine Racoma is the Content Manager of eTranslation Services. Her long experience in an international development institution and extensive travels have provided her a wealth of knowledge and insights into cultural diversity. She writes to inform, engage, and share the idea of the Internet being a useful platform for communicating, knowledge sharing, educating, and entertaining. You can find Bernadine Racoma at Google Plus, on Facebook and Twitter.
