Do I need a BNPL solution to offer flexible payments?

Jonah Remz
Jonah Remz
Head of Finance
Posted on
May 30, 2023
min read
Do I need a BNPL solution to offer flexible payments?

In recent years, there has been a growing emphasis on the importance of flexibility in payment options. With the economic downturn causing consumers and businesses alike to have less money on hand, options that allow customers to defer payments, pay in installments, or otherwise stretch their dollars are becoming more common. 

This trend has been felt the most strongly in the B2C market, particularly with the advent of buy now, pay later (BNPL). BNPL providers like Klarna, Afterpay, Affirm, and even Paypal really started to pick up steam during the COVID-19 pandemic as online shopping boomed. Today, BNPL is estimated to be a $305 billion industry, and it’s showing no signs of stopping its growth—by 2026, the global BNPL industry is estimated to be worth $559 billion. 

With all this noise in the B2C world, the B2B world has started to take notice. Many SaaS B2B companies are looking for ways to incorporate flexible payment methods into their pricing and sales process, while several fintech companies have been trying to create B2B BNPL solutions designed to cater to the needs of larger, more complex B2B transactions.

But do you really need to offer BNPL to satisfy the itch for flexible payments? 

This article will explore the various options available for SaaS B2B companies looking to offer flexible payments, how they work, their benefits, and their shortcomings. We’ll also discuss the benefits of using a BNPL provider—as long as it’s made for your business model in mind.

Why do SaaS B2B companies need flexible payment methods? 

Flexible payment methods like BNPL have become increasingly popular in the B2C space, and for good reason—both the customer and vendor benefit. In addition to providing much-needed flexibility for customers, B2C BNPL provider Splitit was able to decrease cart abandonment by 10% and increase checkout conversion by 78%, Klarna was able to boost checkout conversion across all its customers by an average of 35%, and Affirm reported an average increase of AOV (average order value) by 85%.  

Although the B2B market and B2C market have their differences, flexible payment options like BNPL can result in many of the same benefits for B2B vendors, especially in the B2B SaaS space. Here’s why implementing a flexible payment option into your sales and payment process can be beneficial.

Everyone wants to save money—especially during a downturn

In today's economic climate, cash flow is more important than ever. Since the recent downturn, SaaS B2B companies have been experiencing less VC funding, lengthened sales cycles, shorter runways, and the threat of valuation shadows—making it so vendors want to get more sales than ever while buyers have less cash to spend than ever. (To learn more about the state of SaaS in 2023, check out our Pulse of SaaS report).

For SaaS companies selling through annual or long-term contracts, this has caused increased collection time and payment issues. According to an internal survey, 40% of companies have experienced increased collection times in the past year, with 22% increasing collection time by more than 30 days. Flexible payment options can provide a way for buyers to preserve cash flow without sacrificing revenue for vendors. 

Customers are starting to expect it

The B2C consumers who have gotten used to flexible payments don’t exist in a vacuum—many of them work and play a role in transactions in the B2B world. So, as they get used to the convenience and financial benefit of flexible payments in their home life, they’re expecting to see it in their work life as well

Overall, the world is trending in a direction where flexible payments are becoming the norm rather than the exception. As competition increases in the SaaS world from more and more companies using SaaS tool stacks, offering flexible payment options can give companies a competitive advantage. 

Who’s responsible for flexible payments: Buyer or vendor?

But wait a minute—haven’t people been paying flexibly for products for a while now? Isn’t that what credit cards and loans are for? Why is it suddenly the vendor’s responsibility to supply flexible payment options?

Traditionally, the burden of budgeting a purchase has fallen on the buyer, who might secure outside financing or use credit to purchase a product. This is especially true for B2B SaaS buyers, who typically have their own source of financing to pay for important SaaS tools. 

While this makes things easy for the vendor, this can be a cumbersome process for the buyer, as loans, credit lines, venture debt, and other financing options can come with high interest rates and added stress. It’s also very time-consuming—having to wait for approval on a loan in order to make a purchase can stretch the sales process by weeks or months, which hurts both the buyer and the vendor.

While these buyer-supplied flexible payments are fine if there’s no other option, both parties can benefit more from vendor-supplied options. Vendor-supplied flexible payment options make the purchase process easier and more affordable for the buyer, which results in faster sales, more conversions, and increased revenue for the vendor. Flexible payments also make the vendor more attractive when compared to competitors who don’t offer such options. Plus, many flexible payment options, like Capchase Pay, are designed to integrate seamlessly into your existing sales process and require little to no maintenance—so you don’t need to worry about spending time or money on setting it up. 

What are my flexible payment options as a SaaS B2B company?

B2B SaaS companies that typically sell in annual contracts have several options for offering more flexible payments to their customers. Here are the pros and cons of some of the most popular options.

Short-term contracts

Short-term contracts are a popular option for lessening the burden of a costly upfront payment for annual contracts. Because short-term contracts make your product more accessible and affordable, you can reach a wider audience of potential customers, secure more conversions, and shorten sales cycles. Short-term contracts are particularly useful when you need to have impressive adoption rates or pump up your sales numbers.

However, it's important to note that short-term contracts also increase churn, require more time spent on billing and managing payments, and generally decrease your customer LTV (lifetime value) and ACV (annual contract value) in the long-run. Additionally, short-term contracts don’t always make sense with every product, and may require creating a “lite” version of your software to fit the smaller payments—which basically means creating an entirely new product. 

Overall, short-term contracts are best suited for low-ticket products or services that already fit the monthly recurring payment mold, and aren’t the best for complex enterprise-level B2B products.

Offering discounts on long-term contracts

In the face of a challenging sales environment, many sales teams turn to offering discounts on long-term contracts to incentivize customers. This has the advantage of closing sales faster, driving conversions, and immediately replenishing cash stores, as it still requires customers paying upfront for a full annual contract.

However, offering discounts can reduce overall revenue (sometimes to an extreme degree), and can make it seem like even you aren’t confident about the fairness of your pricing. If customers get used to a lower pricepoint, they may view your regular price as too expensive, and refuse to convert or renew unless you offer the discount. This can be disastrous for long-term churn rate, customer satisfaction, and cash flow.

Overall, discounts can create a great short-term burst in sales, but they’re not a sustainable long-term solution. To learn more about how discounts compare to flexible pricing, read the full article here

Usage-based pricing

Usage-based pricing is a model where customers are charged based on the amount of product or service they use in a given time period—say, using 1 terabyte of storage within a month at a rate of $25 per terabyte. 

This approach can work well for products that vary by usage, such as cloud storage or communication tools, and can help convert clients that may want to use your product a little bit, but not enough to commit to the full-value price. It’s a great way to make buyers feel like they’re getting their money’s worth and have control over how much they’re spending.

However, usage-based pricing has limited applications, and won’t make sense with every SaaS product. Additionally, a true usage-based model that tracks user data and generates pricing accordingly (as opposed to having flat rates based on usage “buckets”) will require a tremendous amount of time, effort, and money to execute accurately, since it essentially requires making a new back-end product. It can also make your financials complicated—instead of worrying about simple numbers like monthly sales, you now have to worry about how your sales, marketing, and revenue can be divided by different usage-based rates.

Deferred payments and other DIY flexible financing

Companies looking to increase upfront affordability without sacrificing revenue or ACV may try to offer self-made flexible payment options like deferred payments, installment payments, or other pay-as-you-go systems.

However, like usage-based pricing, this method requires making what is essentially its own product and platform, which can be costly, time-consuming, and in many cases, is simply unrealistic. It also makes it so that you, the vendor, have to as a bank—you’re essentially lending money to the customer, and if the customer can’t pay it back, you take the loss directly, without any safety net. 

Retrofitting B2C BNPL solutions for B2B transactions

With how many tried-and-true B2C BNPL solutions are out there in the market, it may cross your mind to simply retrofit an existing B2C BNPL or flexible payment solution into your B2B sales process. 

While this may sound simple and straightforward,  it's not as effective as it may appear. B2C BNPL solutions aren’t built to handle the B2B sales and payment process, and there’s a high possibility it will flat our reject your transactions. B2C providers generally cap their lending limit somewhere around $10,000, which is far too low for the average B2B transaction. Additionally, B2C providers don’t have the proper integrations for tracking and invoicing, meaning you’ll have to do these steps manually, or connect the B2C provider to some other platform to finish out the process.

Choosing the right BNPL solution as a SaaS B2B company

If you're looking to offer flexible payment options to your customers, a BNPL solution is probably the best option out there to balance vendor and buyer needs.

Traditional payment options like short-term contracts or discounts on long-term contracts can hurt your revenue, cash flow, and churn rates. And while more creative options like usage-based pricing, creating your own BNPL system, or retrofitting a B2C solution may seem appealing, they come with their own set of challenges and risks—namely, they require committing time, money, and energy into building and managing what is essentially a new product.

The solution, then, is to opt for a BNPL solution specifically tailored for your needs as a SaaS B2B business—and that’s where Capchase Pay comes in.

Capchase Pay is a BNPL solution that is built to handle the size, complexity, and flexibility of B2B SaaS transactions. With Capchase Pay, customers can pay in affordable installments for annual contracts, while vendors get the access the full contract value of each contract upfront. Here are some of the key benefits Capchase Pay provides:

  • Easy and seamless use. All customers need to do is click on a payment link you send, and they’ll be able to access a buyer portal where they can make and manage payments. Vendors have their own portal to view, manage, and track payments. 
  • Integration with Hubspot, Salesforce, and other popular CRMs, so it can seamlessly be added into your existing sales process.
  • Allows vendors to enjoy the high ACV, increased revenue, stable ARR, and increased upfront cash flow of long-term contracts, while customers get to enjoy the affordability and convenience of short-term contracts.
  • Helps you expand your pool of potential customers, shorten sales cycles, and secure more conversions and renewals by removing the financial barrier of a costly upfront payment.
  • Makes conversions easier for difficult customers, like SMBs, startups, or businesses with erratic cash flow.
  • Takes care of all your billing and collections for you, so you don’t have to worry about tracking and chasing down late payments. 

For instance, B2B lead generation company CIENCE was able to halve it’s sales cycle, generate $3.7 million in revenue, and reduce it’s time to cash from 15 days to just 1 day, all within one month of using Pay. 

Get started with Capchase Pay today

While there are many different flexible payment solutions out there, BNPL makes the most sense for most B2B SaaS businesses. If you’re looking to integrate a BNPL solution into your sales and payment process, one that’s built specifically for the B2B SaaS world in mind is your best bet.

Capchase Pay can provide all the benefits of most other flexible payment options, without any of the drawbacks. Built for the SaaS world in mind, it can help you increase your overall revenue, cash flow, and conversions, without having to build a new product or pricing model, dedicate extra time to managing payments, or sacrifice the benefits of offering high-value annual contracts. 

Don't sacrifice revenue or upfront cash flow with short-term contracts or discounts. Get started with Capchase Pay today and start offering the best flexible payment solution to your customers. Click here to learn more about Capchase Pay, or talk to our team to see how you can get started offering it to customers today.