Buy-now-pay-later firms switch from Gen Z shoppers to businesses
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Buy-now-pay-later firms switch from Gen Z shoppers to businesses

Buy-now-pay-later firms switch from Gen Z shoppers to businesses

Startups such as Billie, Mondu, Tranch and Tillit are offering buy-now-pay-later solutions to companies in an attempt to secure a slice of the $700bn industry


Fresh from their shake-up of Gen Z’s shopping habits, buy-now-pay-later (BNPL) firms are now targeting business payments as the next sector ripe for disruption. Startups such as Billie, Mondu, Tranch and Tillit are all offering BNPL solutions – which allow buyers to split their payments into instalments – to companies in an attempt to secure a slice of a $700bn industry that gives companies short-term loans to help them manage their daily business.

The use of short-term credit, most notably via supply chain finance, has become a lifeblood to companies dealing with a range of issues from Covid 19-related lockdowns to rising input costs in an inflationary environment. With few tech entrants into the sector – and the spectacular failure of Greensill Capital – the industry remains dominated by established lenders such as Barclays and HSBC Holdings in the United Kingdom and Deutsche Bank AG in Germany.

Pure-play BNPL firms have seen their valuations crash this year as rate rises across the world challenge the viability of their business models. But plenty say the ease of use such upstarts can bring to age-old credit products will prove a winning formula in this part of the market. “These B2B BNPL companies can easily win over market share from slow-moving traditional banks,” said Lily Shaw, an early-stage investor at North American venture capital firm Omers Ventures, which is not currently invested in the sector but is actively looking at the space. “Banks’ risk profiles are set up in such a way that they can’t move fast enough.”

Berlin base
Billie and Mondu are approaching the model through a BNPL lens – offering small businesspeople a similar experience when buying office equipment as a fashionista would when buying a Gucci handbag using Klarna or Afterpay. “If a typical transaction on business-to-consumer BNPL is about 80 to 90 euros, our typical transactions are about 10 times that size,” said Aiga Senftleben, co-founder of Sequoia-backed Billie. The Berlin-based firm, which was valued at $640m in its last funding round, works with banks as financing partners and operates currently in Germany, Austria and Sweden. Mondu co-founder Malte Huffman said that it is hoping to make inroads into the trade finance space, especially given that more and more business transactions are being conducted online. “We believe there’s a $200bn market opportunity for B2B BNPL just in Europe and the US,” he said.

In Germany alone, for example, there were EUR200bn ($204bn) of e-commerce business transactions completed in 2021, compared with EUR86.7bn of business-to-consumer e-commerce, according to data by Statista, a research firm.

Growing pains
Despite their stark valuation declines, BNPL companies such as Klarna, Afterpay and Affirm Holdings have shaken up the e-commerce sector with customer-friendly apps and popularity with 18-24 year olds, forcing many traditional banks such as Natwest Group to launch competing offers. The advantage these B2B BNPL startups have is that traditional banks may step back from this sector amid the deteriorating economic outlook, thereby reducing the competition, according to Jeff Tijssen, head of global fintech at consultancy Bain & Company. “It does solve some important cashflow issues for businesses, and you have some big investors such as Sequoia and Klarna involved,” he said.

“The slowdown in the economy will give them opportunities but could also have a negative impact. It’s still early days.”

Read: Buy-now-pay-later provider tabby secures $54m in funding

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