Are India’s BNPL 2.0 and B2B set to be disrupted?

Both as a term and as a financial product, “buy now, pay later” has become mainstream in the past few years. BNPL can take many forms, including small-ticket products on fintech platforms, marketplaces and consumer checkouts to more complex closed-loop offerings on markets like Amazon Pay Later. They are also extending their offer for outside usage. Companies that wish to increase the consumer credit and consumption can offer some variations.

BNPL is the global leader in consumer lending and consumption. BNPL consumer offerings can be a great alternative to credit cards for those who don’t have a credit record and cannot get credit from banks. A specific vertical of BNPL products, aimed at small- and medium businesses (SMEs), is gaining traction. The new vertical is called “SME BNPL”.

BNPL is particularly helpful when small business credit is offered through transaction-based or flow-based financing.

India’s B2B Commerce is going online

India has experienced a tremendous increase in e-commerce over the last decade. E-commerce has seen rapid growth across India, with both large and small cities experiencing rapid smartphone penetration and greater internet access. Parallel to this, consumer credit is also booming as digital lending and credit cards have sparked credit-based consumption in both offline and online shops.

The large B2B supply network that enabled the growth of the retail market had its problems. It involved many intermediaries, which led to bottlenecks and inefficiencies. Streamlining was a major problem. Tech players quickly responded to the chaos by organizing B2B commerce markets at different touch points. They also introduced convenience, pricing, and more product accessibility through modern logistics.

Image Credits: Redseer

Since 2020, India’s B2B electronic commerce market has grown rapidly. The use of paper by small businesses has been replaced with smartphones and apps to manage a large part of their business. This is causing widespread disruption to the way businesses do business today. Small businesses that used physical methods to purchase goods and services in the past were forced to adopt new online business models by COVID-19.

Image Credits: Redseer

The widespread promotion by the Indian government of the Unified Payments Interface, a system that allows instant payments has revolutionized the way people pay for goods and services. Next step in solving the digital B2B problem is embedding credit within every invoice and transaction.

Image Credits: Redseer

Online B2B transactions are comparable to offline, but there’s one thing missing: Terms offered by vendors to small businesses. Contrary to consumer, businesses must purchase goods and services in order to trade or increase their value, and then sell them to other consumers. The process takes time and isn’t immediate.

Small businesses often require credit terms to purchase inventory due to the longer sales cycles. A BNPL product designed to support small businesses can help them grow and reduce cash flow burdens as they expand their B2B business through digital channels.

What is the difference between consumer BNPL and SME BNPL for consumers?

A SME BNPL product can be used to purchase finance for small businesses that transact with distributors, suppliers or aggregators.

Publiated Fri, 10 Sep 2021 at 19:59:03 +0000

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