What next in BNPL?

What next in BNPL. 

Stuart Thornton, 14th May

I was reflecting the other day on a number of articles and recent market movements related to BNPL. This recent ”expose” from Professor Galloway is the latest questioning the value. There are some fair points made, albeit that it misses the positive aspects of providing people “room to breathe”. People always will shop as it defines who we are, and as argued by some, brings happiness.

 Done well I truly believe it is technical innovation at its best challenging the typical bank mentality and business models of making money on people's misfortune. Ultimately the balance of managing risk, and merchant outcomes are critical. 

 With these negative sentiments starting to swirl however, I was thinking whether this innovation could be applied better elsewhere. One area which I have heard a lot of interest in is B2B BNPL. There are some fundamentally different challenges but arguably the concept of BNPL could be far greater than consumer shopping. A solution in this space solves one of the fundamental issues that all companies struggle with - cashflow

 The B2B market is different for a few reasons. Companies have far more complex P&Ls than a consumer and rely less on emotion and more on a distinct need to purchase to enable their business.  Volumes are greater and noticeably eCommerce has yet to truly be adopted in SME land.

There are a number of companies operating in SME financing, the broader working capital fund raising and in the banking and card space.  However there are only a few venturing into true BNPL

Bizpay in the Australia market has recently been in the news and perhaps unfairly involved in the consumer BNPL share tumble maelstrom. They are reportedly looking to IPO at some point this year. BIllie - the.Berlin-based BNPL firm wants to do for B2B payments what companies like Klarna have done in the consumer market. They recently raised $100m to further that plan.

We would often have merchants come to us asking to use our functionality for their own requirements.-  to buy stock and carefully manage their cash flow. We as an SME would have also benefited from the opportunity to spread our payments over time. 

I see the same phenomenon of companies borrowing the BNPL moniker already. In reality their lending/credit facilities are not the same. One pushes the pain further down the river. BNPL helps to proactively manage the cash flow over a period of time. Perhaps the parallels are a lot closer to consumer BNPL after all/ 

Will this be the next frontier of BNPL? Most certainly the SMES in Asia certainly aren't well looked after. Banks tend not to offer credit to smaller SMEs when they most need it. Supporting SMEs in Asia is an untapped trillion-dollar market opportunity and there is a $300 billion SME funding gap in South East Asia.

It will be interesting to see if this becomes a thing.  I will certainly be following this space