Is India’s BNPL 2.0 set to disrupt B2B?

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Anubhav Jain is co-founder and CEO of Rupifi, India’s first embedded lending fintech. He has greater than a decade of expertise in credit score danger, analytics, buyer administration and portfolio growth.

Each as a time period and as a monetary product, “purchase now, pay later” has grow to be mainstream prior to now few years. BNPL has advanced to imagine varied kinds at the moment, from small-ticket choices by fintechs on client checkout platforms and marketplaces, to closed-loop merchandise provided on marketplaces comparable to Amazon Pay Later (which they’re now extending for outdoor use as properly). You can even see some variants provided by firms that need to increase the scope of consumption and client credit score.

Globally, BNPL has seen essentially the most progress within the client phase and has pushed retail consumption and lending over the previous few years. Shopper BNPL choices are a great various to bank cards, particularly for individuals who don’t have a credit score historical past and might’t get credit score from banks. That mentioned, a particular vertical of BNPL merchandise is gaining traction — one focused towards small and medium enterprises (SMEs). This new vertical is named “SME BNPL.”

BNPL might be notably helpful when flow-based underwriting or transaction-based underwriting is used to supply credit score to small companies.

B2B commerce in India is shifting on-line

E-commerce has seen large progress in India over the previous decade. Skyrocketing smartphone and web penetration led to speedy progress in e-commerce throughout giant cities and smaller cities alike. Shopper credit score has additionally taken off in parallel as bank cards and digital lending spurred credit-based consumption throughout offline and on-line shops.

Nonetheless, the massive B2B provide chain enabling the burgeoning retail market was suffering from bottlenecks and inefficiencies as a result of it concerned a plethora of intermediaries and streamlining turned a giant downside. Plenty of tech gamers responded by organizing the beforehand disorganized B2B commerce market at varied contact factors, inserting comfort, pricing and simpler product entry by tech-enabled logistics and a contemporary provide chain.

Online B2B and B2C penetration in India in 2019

Picture Credit: Redseer

India’s B2B e-commerce area has developed quickly since 2020. Small companies have moved from utilizing paper to smartphone apps for operating a major a part of their day-to-day enterprise, resulting in widespread disruption in how companies transact at the moment. The COVID-19 pandemic additionally compelled small companies, which had been earlier utilizing bodily means to obtain items and providers, to strive new and on-line fashions to conduct their affairs.

Graph depicting growth of India's B2B retail market

Picture Credit: Redseer

Furthermore, the Indian authorities’s widespread promotion of an instantaneous funds system within the type of the Unified Funds Interface (UPI) has modified how individuals ship cash to one another or pay retailers for his or her items and providers. The subsequent step for fixing the digital B2B puzzle is to embed credit score inside each transaction and bill.

Investments in online B2B in india 2016-19

Picture Credit: Redseer

If we evaluate on-line B2B transactions to the offline world, there is just one lacking hyperlink: The phrases provided to small companies by their provider/distributor or vendor. Companies, in contrast to shoppers, should purchase items and providers to finally commerce them, or add worth and promote to shoppers or others down the worth chain. This course of shouldn’t be rapid and has a sure time cycle connected.

The longer gross sales cycle means many small companies require credit score fee phrases when shopping for stock. As B2B commerce scales and grows by digital means, a BNPL product that caters to the wants of SMEs can help their progress and alleviate the burden on their money flows.

How does client BNPL differ from SME BNPL?

An SME BNPL product is a purchase order financing product for small companies transacting with suppliers, distributors, aggregator platforms or B2B marketplaces.

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