Understanding “B2B Buy Now Pay Later”
What is Buy Now Pay Later?
"Buy now, pay later" (BNPL) is a type of payment option that allows consumers to purchase goods or services and pay for them over time instead of upfront. Typically, BNPL services offer short-term financing plans with no interest or low-interest rates.
When a customer chooses to use a BNPL service, they can select their desired products or services and complete the checkout process as usual. However, instead of paying the full amount upfront, the customer can choose to split the total cost into several installments, which they will pay back over time.
BNPL services have gained popularity in recent years, particularly in the e-commerce sector, as they provide consumers with greater flexibility and convenience in managing their finances. However, it's important for consumers to carefully consider the terms and conditions of the BNPL service, as they may be subject to fees and interest charges if they don't pay back the installments on time.
How does it work for business-to-business (B2B)?
Simple user experience. If you don’t have online payments we help you set it up.
Underwriting. Our API is called and we determine the buyer’s fraud risk.
Flexibility. Customer sees the payment options which have already been approved for them.
Instant Payment. Once the goods are shipped, or the service delivered, we pay you and handle collections from your customers. No risk involved for your business
Is Buy Now Pay Later same as credit?
Buy Now, Pay Later (BNPL) is a type of credit, specifically a form of trade credit that enables consumers to delay payment for purchases made on credit. Trade credit has been used in business for centuries, and the US Federal Reserve System recognizes it as the most essential form of short-term financing for firms. BNPL is a safe and straightforward way to provide trade credit online, streamlining and accelerating processes that are commonplace in the offline world.
How is Buy Now Pay Later different from a credit card?
Both buy now, pay later (BNPL) and credit cards allow you to spread out the cost of your purchases over time. However, there are several key differences between the two.
Firstly, repayment periods are more flexible with BNPL. With a credit card, you typically have to pay off your balance every month, while with BNPL, you have several repayment options and can defer payment until a later date. This means you have more control over how you manage your finances with BNPL, but you also have to be mindful of repayment deadlines.
Another difference is that BNPL services are typically associated with specific retailers or online marketplaces, while credit cards can be used at any merchant that accepts them. When using a BNPL service, you may only be able to make purchases from a limited set of retailers.
Lastly, credit card usage is more likely to affect your credit score, as even applying for a credit card can have an impact on your credit score if you're not approved. BNPL services generally don't have as much of an impact on your credit score, although late payments could still negatively affect it.
What problem does BNPL solve for businesses?
Buy now, pay later (BNPL) solves the problem of cash flow instability for businesses. In the B2B world, extended payment terms are common, but when businesses are required to pay their suppliers immediately, it can put a strain on their cash flow. According to a recent study, many businesses have outstanding payments that are tied up in invoices, making it difficult for them to manage their finances effectively. This can lead to difficulties with payroll and hinder investment back into the business.
Although credit has been a common practice in the business world for some time, BNPL is an innovation that brings the offline payment processes into the online world. With the rise of e-commerce as the preferred method of purchasing in B2B spheres, businesses need a secure and straightforward way of offering and processing the payment options their customers are used to offline.
BNPL allows businesses to close gaps in their cash flow and gives them more time to pay, which can boost their spending power. It removes the limitations of cash in the bank, allowing businesses to order stock they may not have been able to afford otherwise. This can have a positive trickle-down effect on the entire business, allowing it to grow at a faster rate and make improvements without using all their cash upfront. Importantly, businesses have complete control over when and if they use BNPL, making it a flexible financing option.
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