“A B2C BNPL transaction is like a tweet — 140 characters, while a B2B BNPL transaction is like passing a bill through Congress”, said Chris Tsai, the CEO and Co-Founder of Resolve — half in jest, half in earnest. But it fairly sums up the B2B challenge.
Life is not easy for B2B platforms, less easier for B2B marketplaces. Compared to B2C, B2B buying is a different ball game entirely. Sales cycles are long. Multiple decision-makers are involved. Buying process is complex. Customer loyalty is excruciatingly hard to maintain. Customer-specific pricing is tough to crack. Suppliers must be assured liquidity. Let’s just say B2B woes make an endless list.
However, B2B commerce is a pie three times larger than that of B2C. Take the case of India, for instance. When B2C is still talking in billions, the B2B payments market touched $7.6-8.0 trillion in fiscal 2022 and is poised to grow to $10-11 trillion in fiscal 2026.
Although the B2B potential is conspicuous, the complexity of lending at the point of sale is demonstrably higher than in B2C — you have identity verification, fraud checks, credit checks, enrollment, underwriting, reconciliation into accounting systems, multiple payment streams, chasing up payers, so on and so forth. Exactly why the B2B industry has been slow to adopt embedded credit. But the thing is, a credit-enabling FinTech stack is not a nice-to-have but a business necessity.
Buyers expect terms of at least net 30 to net 90 (i.e 30-90 days to pay from the time of billing), and suppliers expect cash flow credit. If marketplaces can get their credit offerings right, buyers and average order values (AOV) will grow for the sheer payment experience, and suppliers can in turn sell more. The best part? The more value you add, the more ‘take rate’ you can charge. But the question is how do you add financing to your tech stack — especially one that adds value?
Three ways to shorten & sweeten B2B financing
It’s not the ‘how’, it’s the ‘what’
Most B2B marketplaces don’t have the ability to offer net terms (time to pay for purchased goods and services) across multiple vendors. But a buyer would naturally want to buy from multiple sellers, or he/she wouldn’t be on a marketplace in the first place. So, how do you offer net terms across different third-party products, within the same cart?
In this case, for buyers to have a seamless marketplace experience, they must qualify for terms once and then purchase from any vendor they want. Hence, ‘what credit products’ is the more important question to ask than ‘how to build it’, for the latter becomes solvable only when there’s clarity on the former.
Marketplaces sit on a trove of data that can help them map borrower profile and the purpose of the loan to the right credit product. For instance, if you offer only term loans, you would be catering only to a segment who often have a need for lump sums. You would be completely ignoring the segment who needs the convenience of revolving credit for consistent purchases.
For instance, at FinBox, we help B2B marketplaces become an anchor to a diverse network of lenders and also build end-to-end infrastructure for a variety of credit products such as BNPL, Credit lines, Pay in X, Business loans, Co-branded credit cards, etc. We enable one-touch onboarding, and enable fully automated identity decisioning, fraud checks, and alternate data-based underwriting to disburse credit, in minutes.
Fast and flexible wins the race
Depending on the nature of the transaction, buyers might want to request extended terms or update their term limits. Without being able to quickly qualify, adjust terms, or have credit product options, buyers may simply choose to go back to their offline vendors where they can negotiate in person. Here's where FinBox's credit stack excels. Our ability to underwrite dynamically and enable real-time approvals empowers marketplaces to offer higher credit limit or real-time term loans.
Here’s another scenario, a new business might lack a strong credit history but show high growth potential. Our advanced credit-decisioning model has superior risk bucketing capabilities based on holistic understanding of the buyer and their business. Herein lies FinBox’s capability to price loans based on risk and offer best terms to customers. To further maximise approvals on the marketplace, we cascade using a multi-lender stack and ensure higher credit disbursement.
Collect your wits during collections
Without the right collections approach, you end up creating friction that drives a wedge between you and your customers, and also between you and your lending partners. For marketplaces, things can get quite tricky. You don’t want to overwhelm your customers but at the same time you have to carefully measure and deploy reminders and nudges that convert.
At FinBox, we use our AI-ML capability to identify borrowers that will potentially default by mining insights that were previously unidentified, and accordingly personalise communication to borrowers.