The B2B BNPL sector is benefiting from soaring inflation and working capital optimization in 2023

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Rising inflation levels have increased the pressure on small and medium enterprises, which were already reeling under the impact of the global pandemic outbreak. With worsening economic conditions, small and medium enterprises (SMEs) turned to buy now pay later providers to weather the cost-of-living crisis. Many businesses have leveraged business-to-business buy now pay later services to pay suppliers sooner and secure inventory more rapidly while extending their runway and improving cash flow. This has created the perfect growth environment for B2B BNPL providers globally.

In Europe, especially, the B2B BNPL has been growing at a rapid rate amid the rising demand for such products. Over the last few quarters, several players have entered the segment, which also includes banking institutions like Santander. Amid the growing competitive landscape in the segment, the trend of strategic alliances is also growing in the sector, as players seek to expand their product offerings in the region.

• Mondu, for instance, entered into a strategic alliance with Acquired.com to expand the B2B BNPL offering in the United Kingdom and Europe in July 2023. Leveraging the network of Acquired.com, Mondu will be able to make its B2B payment offerings available to customers across the United Kingdom and Europe.

Launched in Germany, in 2021, Mondu has been growing at a rapid pace amid the current macroeconomic environment. Since its inception, the firm has expanded its services in Austria, the Netherlands, France, and Belgium. Going forward, Mondu is expected to target more European markets to accelerate its growth in the B2B BNPL market.

Other players in the European region are also seeking to expand their footprint to tap into the high-growth market. To accelerate their regional expansion, firms are raising funding rounds from venture capital and private equity firms.

• Hokodo, for instance, announced that the firm had raised an investment from Citi in its extended Series B round in April 2023. Initially, as part of its Series B round, the firm raised US$40 million in 2022. The round was led by Notion Capital and included investments from Korelya Capital, Opera Tech Ventures, Mundi Ventures, Mosaic Ventures, and Anthemis.
• The firm is planning to deploy the funding from the extended Series B round to accelerate its regional expansion. As of April 2023, the firm had a presence in the United Kingdom, France, Spain, Germany, Belgium, and the Netherlands. Additionally, the firm is also expected to provide more working capital to its customers on the back of the extended Series B investment round.

Hokodo, in June 2023, also acquired a European payments license. This makes Hokodo the first BNPL provider with such a license in Lithuania. The license will enable Hokodo to provide merchants with a complete suite of payment solutions, including BNPL services. This, in turn, will enable Hokodo to tap into more merchants and businesses from the short to medium-term perspective.

The trend of fundraising is emerging in other regions as well in 2023. In the United States, for instance, Vartana announced that the firm had raised US$20 million as part of its Series B round in May 2023. The funding round was led by Activant Capital and included participation from Mayfield, Audacious Ventures, and Flex Capital. The firm, notably, plans to use the capital to improve its product offerings and broaden its financial marketplace partnerships in the United States.

In India, as well, the demand for B2B BNPL offerings has been growing at a rapid rate in 2023. Firms like actyv.ai have achieved significant traction and growth in H1 2023. actyv.ai, for instance, crossed US$1 billion in transactions in seven months as of July 2023. This is a clear indication that the demand for B2B BNPL products is relatively high in the Indian market, and there is plenty of headroom for growth in the region.

As per PayNXT360’s estimates, the BNPL market in India is expected to grow at a compound annual growth rate (CAGR) of 12.2% from 2023 to 2028, while the gross merchandise value will increase from US$11.62 billion in 2022 to reach US$25.38 billion by 2028. actvy.ai is also expanding its operations in other regional and global markets like Sri Lanka, Bangladesh, Southeast Asia, the Middle East, and Africa to tap into the high-growth segment.

Going forward, PayNXT360 expects the B2B BNPL sector to keep recording strong growth in the global market while providing growth support for the overall BNPL sector. Furthermore, the competitive landscape is also projected to grow substantially, as more and more firms enter the segment to accelerate their growth. Venture capital and private equity funding deals are also expected to remain elevated in the segment when compared to the B2C-focused BNPL sector.

To know more and gain a deeper understanding of the global BNPL market, click here.