Buy Now Pay Later For B2B Payments
As a short-term alternative to no-cost EMIs, Buy Now Pay Later for B2B Payments has emerged as one of the most successful economic trends of recent times. This closed loop digital financing solution has positively impacted the Indian industrial market – from traditional Blue-Chip companies to the larger MSME sector.
This measure is especially important for these small-to-medium enterprises, as most do not have access to formal credit. Traditional financing methods need hard collateral, and the lack of it leads to a glaring funding gap. As this sector makes up around one-third of the GDP in India, the Pay Later for B2B Payments scheme is quintessential in solving the small businesses’ cash flow problem.
What Is BNPL For B2B Payments?
The Buy Now Pay Later scheme caters mostly to business-to-customer transactions. However, with the changing demands of the market, the supply chain financing method has also established itself as a crucial element of the B2B model.
Traditional institutional lenders often consider MSMEs high-risk borrowers due to their lack of assets and capital. So, Pay Later for B2B Payments helps small business owners buy raw materials from the sellers without spending a lump sum of money upfront.
Fintech services such as KredX work as a financial intermediary in this business model. These intermediaries pay off the upfront payment charges of the total selling price to the seller on behalf of the retailers, dealers or distributors. These buyers, in return, have the scope of paying the purchasing amount via instalments to their financiers over a certain period of time.
BNPL model continues to be an effective approach to cost-reduction through process optimisation for business owners. So consequently, this industry has been projected to grow ten-fold in this country in the near future.
Benefits Of Buy Now Pay Later For B2B Payments
- Helpful For Budget-Crunch Issues:
Due to a comparatively flexible regulatory framework, business owners can get stress-free working capital financing from the fintech services in this model. As a result, they can opt to buy the necessary paraphernalia needed to carry out proper business functions without unrestrained cash flow.
- Cost-Effective Means:
The BNPL model is comparatively more affordable than opting for a credit card. A borrower does not have to spend an extra amount for GST, cash advance, or annual maintenance fee in this scheme. Moreover, KredX offers a merchant discount rate which enables the merchants to save the credit or debit card processing fee.
Compared to credit cards, BNPL is also budget-friendly when it comes to missed payments. For example, the interest rate of a credit card on missed payments can go up to 48%, whereas for BNPL the interest rate stays between 0% to 24%.
- Easier Documentation Procedure:
The BNPL for B2B payments function as a decentralised lending protocol, so the documentation procedure is less rigid than traditional financing institutions. First-time buyers have to fill out the KYC form on the platform of the BNPL provider.
Moreover, this lenient business structure allows numerous MSMEs to meet the eligibility criteria. Additionally, as the fixed repayment schedule of a BNPL model doesn’t need collateral, it functions similarly to the other unsecured personal loans.
- Lucrative Option For Sellers:
BNPL has emerged as the bellwether of alternative financing means because it ensures a beneficial transaction cycle for buyers and sellers. Getting an upfront payment immediately after making a sale is instrumental for a seller’s business growth. Moreover, the improved user experience also leads the cart conversion rate to go upswing.
- Objective Value:
BNPL for B2B payments prioritises cash-flow based metrics over traditional balance sheets. This works in tandem with the unstructured revenue stream of the uncategorised sectors in the Indian product market. As a result, the emphasis is largely laid upon the configurability of the financing needs of specific business sectors.
- Reduced Risk Proposition:
A BNPL business model uses traditional credit data, open banking, alternative data, etc., to make a proper assessment of the credit criteria. This, in effect, can significantly mitigate the risk factor, and expand the scope of credit inclusivity by reaching out to New to Credit (NTC) businesses.
Why Buy Now Pay Later For B2B Payments Methods Stand Out?
The impact of BNPL on B2B payments has been revolutionary in the Indian business market. With the predominance of e-commerce, a highly customised and personalised transaction method has emerged as the need of the hour. With the BNPL method, both sellers and customers can enjoy analytics and AI-oriented personalised payment procedures.
BNPL model also pays great attention to thoroughly assessing and evaluating a buyer profile and designing an appropriate credit line accordingly. This way, there is a comparatively lesser chance of a non-payment issue.
Almost 75 million small businesses make up the MSME sector of this country. Buy Now Pay Later for B2B Payments is especially critical for the development of this sector. So, the fluidity and seamlessness of this B2B BNPL transaction model are essential to ensure the long-term growth of these businesses. Moreover, an integrated API ensures there is no dropout at the point of sale.