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If you've bought anything online recently, you may have noticed an uptick in buy now, pay later (BNPL) options at checkout. Whether it's a computer, a piece of jewelry, a household appliance, or any other item that costs a bit more than your everyday budget allows, many B2C vendors allow you to use buy now, pay later solutions like Klarna, Afterpay, or Affirm to pay in comfortable installments rather than an expensive upfront lump sum.
According to a report from Fortune Business Insights analyzing major key players like Paypal, Affirm, and AfterPay; the global buy now, pay later market totaled $22.86 billion in 2022, and is projected to grow to $90.51 billion by 2029, for a compound annual growth rate (CAGR) of 21.7%.
This trend has occurred for a multitude of reasons, including the COVID-19 pandemic, shifts in the economic environment, and generational approaches to finance. Millennials and Gen Z, for example, make up the bulk of BNPL transactions, with 48% of Gen Z and 47% of Millennials respondents claiming they planned on using a buy now, pay later service to finance holiday purchases in 2022, according to a survey by Retail Dive. Gen X wasn't too far behind at 40%, with baby boomers lagging significantly at 14%.
But, despite the surging popularity of BNPL in the B2C space, the B2B space has remained resistant. BNPL providers rarely serve B2B vendors, and many B2B vendors don't even consider the option—even though trends show B2B buyers would definitely be interested, especially in spaces like SaaS where recurring payments are already the norm.
So, what's the missing link? Why is BNPL for B2B so sparse compared to its B2C counterparts, and how can B2B vendors get in on the B2B gold rush?
This blog will explore what's accelerated the popularity of buy now, pay later solutions in the B2C space, what's prevented B2B vendors from following the trend, and what options B2B vendors have for seeing the benefits of adopting BNPL.
Why buy now, pay later solutions work for B2C businesses
Buy now, pay later solutions have taken the B2C space by storm, and for good reason. They offer a win-win solution for both customers and vendors, leading to reduced cart abandonment, increased sales, improved customer satisfaction, and a host of other positive benefits. Here’s a deeper look at some of the biggest things BNPL has improved for the B2C world.
Reduced cart abandonment and boosted sales
One of the biggest issues that plague e-commerce no matter the industry is cart abandonment. Most studies cite average cart abandonment rates hovering somewhere around 70%, with rates by industry ranging anywhere from 56% to 81%. This means that regardless of industry, over half of shoppers fail to check out despite putting items in their carts.
Buy now, pay later solutions have been shown to drastically reduce these rates and to increase sales and conversions overall. By using B2C BNPL provider Splitit, Virgin Pure was able to increase checkout conversion by 78% and reduce cart abandonment by 10%. In a survey of thousands of customers, Klarna, a BNPL provider with over 150 million users, reported an average boost in checkout conversion by 35%.
Increased AOV
Average order value (AOV) in B2C transactions has also seen a significant increase from buy now, pay later solutions, which is particularly valuable for vendors who see low AOVs due to the low value of the products they sell. Many B2C e-commerce stores are in this position, and can even end up losing money if a customer only buys one low-value product at a time.
On average, Klarna reported an average uptick in AOV of 45% among its users. Affirm reports even higher rates, with an average AOV increase of 85%.
Improved customer experience
But it's not just about the numbers. Buy now, pay later solutions have also had a significant positive impact on the customer experience. By providing flexible payment options, customers can feel more in control over their finances, and get the products they need without having to make huge sacrifices in their budget.
They also get to enjoy a much more seamless purchasing experience than the laborious process of getting approved for an outside loan or credit line before making a purchase.
In fact, customers who use a BNPL are so satisfied with the experience, they’re more likely to return for future purchases. According to Klarna, 36% of consumers say that flexible payment options would encourage them to shop again with a certain brand, while 27% said flexible payments would make them more likely to spend more with a brand.
BNPL for B2B: Why the Resistance?
Overall, the success of BNPL solutions in the B2C space is a testament to the value they can bring to both customers and vendors. By offering flexible payment options, vendors can improve their bottom line and create a more positive customer experience, while buyers can enjoy better personal cash flow and control over their finances.
B2B businesses can enjoy many of the same benefits. Although B2B transactions have differences from B2C transactions, they still share many core features that buy now, pay later solutions can improve. B2B vendors suffer from:
- Lost sales due to buyers being unable to afford the full upfront cost of a product.
- Lost revenue from needing to offer discounts and go through long sales cycles to convert buyers.
- A smaller customer base due to the limitations of a high upfront cost.
While B2B buyers suffer from:
- Not having enough cash on hand to afford the full upfront cost of a product.
- Wanting to preserve cash flow to spend on other necessities.
- Lacking the credit or financial history to independently secure a large enough credit line or loan to externally finance the purchase.
…Just like their B2C counterparts. So, why aren’t B2B businesses joining the trend?
There are a few reasons, most of which have to do with the ways B2B and B2C do differ. Here are some of the biggest obstacles B2B businesses face when trying to implement BNPL for B2B.
More complex transactions
One common concern is that B2B transactions tend to be more complex than B2C transactions. While a B2C transaction might be a simple procedure where the customer purchases an item at a set price and then receives it, B2B transactions can be much more complicated.
In addition to varying pricing structures depending on buyer size, type, and preference; B2B transactions often involve multiple parties, different types of goods or services, and longer payment terms. They also typically involve a longer sales cycle, with deals that must be negotiated several times and go through multiple layers of authority before landing on a final set of prices and terms.
These complexities can make it difficult for BNPL providers to offer a seamless and straightforward B2B solution, or for B2B vendors to adapt a B2C BNPL provider for their uses.
Larger deal sizes
Another reason for resistance is that B2B transactions often contain larger amounts of money than B2C transactions—sometimes by several orders of magnitude. While a typical B2C transaction that involves a BNPL provider might total in the $100 to $10,000 range, a B2B transaction may be in the hundreds of thousands or millions.
Most BNPL providers are set up to handle B2C transactions that go no more than $10,000 in value, with many realistically only approving purchases of $2,500 or less. This makes them virtually useless in the B2B space. And when the only other option is to make your own BNPL solution, it’s easy to see why many B2B vendors would rather reject the idea entirely.
Lack of options
Finally, the biggest reason why B2B vendors are reluctant to adopt buy now, pay later is simply because there just aren’t many options out there for them. With virtually all the popular buy now, pay later solutions targeting B2C businesses with little room to accommodate the needs of the B2B world, many B2B vendors simply can’t use buy now, pay later, even if they want to.
This is unfortunate because many industry trends are pointing toward the need for a B2B BNPL solution, especially in light of the recent economic downturn. Our data shows that within the past year, 40% of SaaS companies have seen an increase in their collection times and 50% of companies have seen an increase in payment delays, indicating that buyers are struggling to make payments the traditional way. Vendors who have addressed this issue by offering flexible payments have been rewarded, with 4.5x better churn rates on average compared to companies that only offer rigid one-time payments or lump sum payments on annual contracts.
B2B vendors are also feeling the strain. With our Pulse of SaaS III report indicating industry-wide trends of cash flow drying up, shortening runways, and growing competition among SaaS businesses, many B2B SaaS vendors could benefit greatly from implementing a buy now, pay later solution. Some businesses have elected to solve these problems by seeking alternative financing, but this doesn’t tackle many of these problems head-on the way a BNPL provider would.
How would buy now, pay later benefit B2B SaaS businesses?
So, if BNPL for B2B did exist (which it does…but I’ll get to that in a second), how would it work, and what kind of concrete benefits would it provide for B2B companies? The following are the biggest improvements a B2B BNPL solution could add to your company.
Improved cash flow
With BNPL for B2B, vendors can receive the full payment for their products or services immediately, rather than waiting for their customers to pay over time. But, they also don’t have to sacrifice the typical loss in sales from only converting customers who can afford to pay all at once.
Between the boost in sales and the lack of wait time involved in getting paid, this can create a serious boost in cash flow for vendors. This cash can be used to invest in growth, expansion, and product development. And, during an economic downturn that’s cut into everyone’s runways and revenue, a little extra cash can be exactly what you need to make it to your next funding round.
Increased sales opportunities
Typically, SaaS vendors can either focus on selling long-term contracts to a smaller pool of customers who can afford the steep upfront payment, or focus on selling short-term contracts to a larger pool of customers—but deal with the increased churn and lower upfront revenue.
Buy now, pay later offers the best of both worlds by allowing vendors to expand their customer pool without sacrificing the high ACV or access to upfront cash flow of long-term contracts. With BNPL, vendors can sell to customers who may not have been able to afford their products or services otherwise, without having to offer short-term contracts that decrease cash flow. This can lead to an increase in sales opportunities and a larger customer base.
Improved customer experience
Another advantage of B2B buy now, pay later is that it can help to improve your buyers’ overall customer experience. By offering buyers an easy way to space out their payments in installments that work for their budget and timelines, your business can cultivate a reputation for being flexible and attentive to customer needs. This improvement in customer experience can lead to increased loyalty and repeat business.
Competitive edge
Buy now, pay later can also give businesses a competitive edge by setting them apart from competitors who do not offer flexible payment options—something that is becoming more and more important in the increasingly competitive world of SaaS.
When several competitors are offering similar products to yours, a small perk like the ability to pay in installments can make a buyer choose one business over the other. Offering a buy now, pay later solution can be just the thing that tips the scale in your favor.
Help to close higher-value deals faster
Because buy now, pay later solutions minimize the upfront financial commitment for buyers, they typically lead to a shorter sales cycle—even for high-value deals that may usually take weeks or months to close.
When the upfront payment for a product is manageable and doesn’t severely cut into a buyer's budget, it’s a lot easier for them to decide to take the plunge. Fewer people need to be involved in the decision-making process, less red tape needs to be cut through, and less hemming and hawing takes place over whether the product is truly worth it. In fact, B2B for BNPL can cut down sales cycles by as much as 50%.
Finding the right BNPL provider for your SaaS B2B business
While there aren’t many B2B BNPL providers that are fit for a SaaS business, there are several options out there, and there are likely to be much more within the next several years.
When choosing a BNPL provider for your SaaS business, it’s essential to find one that offers the following features.
Flexibility
Since many of the benefits of buy now, pay later solutions revolve around payment flexibility, it’s essential to use a provider that maximizes its potential to be flexible.
A good buy now, pay later solution will give your business the ability to offer flexible payment options for your buyers that can be customized and altered based on what makes the most sense for the deal. For example, Capchase Pay offers the ability to create custom payment terms, methods, and schedules that can be paid off in monthly, quarterly, or yearly payments.
Ease of use
Like anything else in the world of SaaS, a product’s user interface can make or break its effectiveness. This is especially important for consumer-facing products, but people in the B2B space aren’t exactly excited about clunky, confusing interfaces either.
A buy now, pay later solution that offers a user-friendly and straightforward interface that seamlessly integrates into your existing sales process can drastically cut down time and frustration spent on selling, processing payments, and tracking payments—for both you and your buyer.
Capchase Pay’s vendor and buyer dashboards are both intuitive and easy to use.
Capability and integration
A provider that has the technical capabilities and integrations necessary to work seamlessly with your existing systems can help to streamline the process of implementing BNPL solutions. This can save you time and money and make it easier to manage your finances.
For example, Capchase Pay is built to be integrated into Salesforce, Hubspot, and other CRMs to streamline the sales process and create as little friction as possible.
Reputation and testimonials: A provider that has a good reputation in the industry and positive testimonials from other businesses can give you peace of mind and confidence in your decision to work with them. This can also help to build trust with your customers.
Billing and payment management
One of the biggest headaches of recurring payments is having to track, measure, and manage them. Between chasing down clients who don’t pay, and ensuring there are no issues with payment methods, finance teams can spend hours each week doing mindless busy work.
A good buy now, pay later solution like Capchase Pay not only serves as a platform to finance installment payments, it also takes care of all the billing and collections. This means that your finance team can spend more time working on tasks that help your company get ahead.
Start benefiting from BNPL for B2B with Capchase Pay
Capchase Pay is the ultimate SaaS B2B buy now, pay later solution because it was built with the SaaS industry in mind.
Between allowing you to create flexible payment terms, managing your billing and collections for you, integrating into your existing sales process, and utilizing a user-friendly platform, Capchase Pay can help you bring the ease of B2C BNPL into the B2B world for your buyers.
For example, after just one month of using Capchase Pay, B2B lead generation company CIENCE was able to:
- Build a more predictable pipeline.
- Generate $3.7 million in pipeline in one month.
- Target SMB customers who otherwise wouldn’t be able to afford a full annual contract upfront.
- Reduce time to cash from 15 days to same day.
- Boost cash flow and have more control over its revenue.
- Halve their sales cycle from 4 to 2 weeks.
If you want to learn more about how Capchase Pay can benefit your B2B business and solve many of the problems buy now, pay later solved for the B2C industry, click here, or schedule a chat with us today.
