The buy-now-pay-later (BNPL) market is expected to grow by a third every year for the next three years, according to GlobalData research. While much of this growth is tied to increased online shopping volumes, there is growing awareness of the value of BNPL in the business-to-business (B2B) space.
The economic conditions that have created challenges for a number of business-to-consumer (B2C) service providers could be a benefit for those focused on corporate applications.
B2B BNPL, like any other form of financing, has seen an increase in its funding costs. However, businesses are often buying from suppliers to drive growth and have a clear return on investment tied to their purchase, suggests Elias Beaino, executive vice-president at Tabit.
“This means that these are not optional purchases that can be delayed,” he says. “Economic uncertainty gets suppliers thinking more about their willingness to take credit risk, while buyers are focusing on extending their runway and improving cash flow.”
However, the challenges that BNPL providers now face are no different from those confronting the banks. Rising interest rates present a challenge to achieving strong unit economics across the board for other financial products, such as factoring.
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