B2B BNPL firms are scaling operations amid the growing credit demand among businesses

B2B BNPL firms are scaling operations amid the growing credit demand among businesses

B2B BNPL firms are scaling operations amid the growing credit demand among businesses

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From being an innovative payment solution serving only consumers with strong credit backgrounds, the buy now pay later (BNPL) segment has emerged as one of the leading financial products in the B2B category over the last few quarters. Although most of the BNPL players are limited to B2C users, the B2B BNPL is also gaining increasing momentum, as the business model is offering a level playing field to businesses, which have been otherwise deprived of working capital and purchase financing.

In Europe, the B2B BNPL market has gained increasing prominence, with several players fighting for market share. Notably, increasing venture capital funding is also assisting the B2B BNPL industry in the European market. In the Middle East region as well, the B2B BNPL business model has started gaining traction amid the growing credit demand among businesses. Consequently, players in the Middle East market are seeking to scale their operations to further drive business growth amid rising demand. For instance,

  • In July 2022, Toggle Market, the Dubai-based technology firm, announced the launch of its new payable financing program for all its Toggle Hospitality digital marketplace customers. Notably, the payable financing program is a BNPL offering that allows its customers to source goods from its supplier network with flexible payment terms.
  • Initially, the firm piloted the BNPL offering with a select few hotels and F&B groups in the Middle East and Europe. However, the firm has now made it available to all eligible hospitality businesses in the region and is also planning to expand the services in the African market, where the majority of the MSMEs are deprived of credit through traditional channels.

Notably, the Toggle Hospitality platform, operated by Toggle Market, is first of its kind direct-to-business marketplace for hospitality furniture, equipment, and operating supplies. While the B2B BNPL service is currently for businesses operating in the hospitality industry, Toggle Market is planning to expand and scale its operations into other business verticals, thereby assisting the firm to finance more B2B purchases online.

To finance B2B purchases, the Dubai-based firm has partnered with underwriters and private creditors. Notably, the firm is making use of credit risk modeling and banking data to provide B2B customers with flexible payment solutions, including up to 365 days of trade credit. The customer base for the firm is growing and currently Toggle Market is serving customers across 27 countries. The launch of the B2B BNPL facility is expected to reduce the risk for sellers significantly, while buyers will receive the much-needed flexibility in times of rising interest rates and inflation.

In the United States as well, the B2B BNPL financing method is gaining increasing momentum among businesses. This resulting demand has led many players to raise funding rounds to further accelerate the growth of their B2B BNPL offering. For instance,

  • In October 2022, Credit Key, the United States-based B2B BNPL firm, announced that the firm had raised US$115 million in a debt and equity round. The investment round will further assist the firm to expand and scale the capital that it can offer to businesses that are using the solution offered by Credit Key. Founded in 2016, the firm has recorded a growth of 4x in volume year over year, whereas the number of merchants using the platform has also surged significantly.

With the credit demand expected to further increase among businesses from the short to medium-term perspective, PayNXT360 expects the B2B BNPL segment to record strong growth, especially in the current macroeconomic environment where formal credit access is difficult through traditional channels. Consequently, PayNXT360 expects more venture capital and private equity dollars to flow into the B2B BNPL segment, where investors are foreseeing higher growth as opposed to the B2C segment, wherein regulatory pressure is affecting the BNPL players' path to profitability.

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