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UK e-commerce success 

Over the last two decades, e-commerce has transformed the consumer retail space. The UK is now the third largest e-commerce market in the world behind the US and China, with revenues projected to hit £225 billion by 2025. Around a quarter of all UK retail sales are now online, up from just under 10% a decade ago, according to ONS data. 

A similar trend is now playing out in the business-to-business (B2B) space. COVID-19 has accelerated big changes in business practices, with companies exploring new digital sales channels, and relying less and less on in-person sales. 

For the first time, B2B sellers are now more likely to offer e-commerce channels than in-person selling, while more than two-thirds of B2B companies now offer e-commerce capabilities, according to McKinsey.

Buy Now Pay Later boom

It’s not just the UK’s e-commerce market that’s heating up. Buy-now-pay-later (BNPL) offerings in the consumer space, like Klarna and PayPal, have also experienced rapid growth. 

BNPL payment options, which offer instant short-term credit at point of sale, are now a familiar part of the consumer e-commerce experience. More than a quarter (27%) of UK adults used BNPL at least once during the last six months of 2022, up from 17% in the previous 12 months, according to the Financial Conduct Authority.

Having proved a huge success for online personal shopping, BNPL is now making waves in the B2B market. Many of the world’s most famous tech investors believe BNPL is a significant opportunity for B2B. 

For example, among the investors in the Norwegian fintech company Two, is Sequoia Capital, the Silicon Valley-based firm notable for its early-stage investments in several high-profile technology companies, including WhatsApp, Google, Airbnb, and various other successful tech ventures. There are now about 10 fast-growing European BNPLs for B2B providers, with at least one valued at £500 million.

By removing existing barriers, BNPL is set to unlock the huge growth potential in B2B e-commerce. While the traditional offline model sees merchants extend payment terms to trusted customers, using trade credit insurance to mitigate non-payment risk, the online world is more transactional. 

Almost anyone can visit your webstore, requiring an instant decision on whether to extend credit. With B2B e-commerce growing exponentially, so the does demand for payment-term solutions.

E-commerce without the risk

When used in conjunction with invoice financing and trade credit insurance, BNPL enables a business to offer customers flexible payment terms, without the risk of non-payment or additional costs. It can help a business grow its online customer base while at the same time mitigating their credit risk.

Offering trade buyers competitive payment terms as part of a fast and seamless e-commerce experience can boost online sales revenues, attracting buyers to webstores and increasing conversion rates. 

When a business buys products online, which could be anything from office furniture to building materials, they might be given credit terms of 30 to 90 days at the checkout. This offer can be made without requiring the traditional manual procedures of credit checks or customer onboarding, even for their first purchase.

BNPL also offers a low-risk and low-cost way to increase international sales and exports. Increasingly, BNPL providers will be able to support international transactions and foreign currencies, enabling firms to get instant online credit terms when dealing directly with overseas suppliers. 

How it works

BNPL solutions are easily integrated into a company’s online store. Sitting alongside traditional payment options at checkout, the BNPL solution is connected directly to the merchant’s own webstore using an application programming interface (API) or via online plugin platforms. 

Customers just click on the BNPL icon to receive an instant decision on payment terms.

This seamless online experience is made possible by a new breed of fintech companies that manage the digital process and provide instant invoice financing. This means the merchant gets paid within 24 hours, minus a fee, and payment is collected from the buyer when it becomes due. 

Working in the background, the seller and/or a trade credit insurer carries out real-time checks on the buyer and makes an instant credit decision, ready and waiting for the customer at checkout.

When used in conjunction with invoice financing and trade credit insurance, BNPL can preserve a sellers’ cash flow and protect the balance sheet against bad debts. 

They get paid upfront, while the insurer takes the risk of non-payment, as well as responsibility for recovering the debt. The solution is also a competitive alternative to traditional payment options, and at a significantly lower cost than the 2%-4% transaction fee charged by credit card providers. 

Disrupting B2B purchasing

For B2B e-commerce to really take off, BNPL solutions require robust technology and data to mitigate credit risk at a global scale. 

To further this, Allianz Trade has partnered with Santander CIB and Two to launch a global one-stop B2B BNPL solution that enables businesses to offer instant deferred payments at checkout. 

The solution matches Two’s innovative technology with Santander’s invoice financing capabilities and Allianz Trade’s trade credit insurance. During an online B2B purchase, Allianz Trade assesses credit requests instantly through its API thanks to its large and deep database, which contains commercial, financial and strategic information about more than 83 million businesses worldwide. This enables Santander CIB to make financing decisions on the spot. 

Everything happens in a fraction of a second, without the end user even realising it. 

B2B e-commerce future

The partnership with Santander and Two is just one example of how Allianz Trade is helping UK companies and the BNPL market bring a fast, convenient and seamless consumer-like e-commerce experience to B2B e-commerce. 

Such solutions take credit insurance to the next level, automating individual credit risk assessments, and potentially bringing more transactions within the scope of trade credit insurance. 

It’s early days for BNPL in B2B, but we expect the technology to quickly scale up and for the market to grow rapidly in coming years as procurement moves online. 

With the global e-commerce market expected to reach almost $5 trillion by 2028, the UK is in a strong position to capture the opportunities of B2B e-commerce and BNPL. As BNPL becomes widely available, it will upend centuries-old business practices and transform B2B purchasing into an Amazon-like experience.