Internal credit bureaus help make decisions faster

While buy now, pay later (BNPL) has exploded in recent years and continues to transform payments in the business-to-consumer (B2C) space, similar models like trade credit have been around for decades, if not centuries. , defining how buyers have plenty of time—often 30 to 60 days—to reimburse suppliers for purchased goods.

But although merchants are not new to extending trade credit to their business customers, it can still be very difficult and time-consuming to determine eligibility, Louis CarbonnierCEO of the French company B2B BNPL Hokodosaid PYMNTS in an interview.

Read more: BNPL’s next trillion-dollar game will come from an untapped B2B segment

“In a good year 1% of UK businesses are going to default, while in a bad year it can be up to 2% – it’s in that range. But then the real eligibility of professional clients for [access] credit terms are often in the 50-60% range,” he said, pointing to the roughly 40% of UK businesses that should be eligible for trade credit but are denied access.

It’s an issue driving the growth of in-house credit bureaus that can make faster decisions for buyers without the need for third parties, he said, pointing to the proprietary technology, credit and analytics stack of Hokodo, which the company uses to obtain its own data. and create their own credit ratings.

See also: Hokodo Raises $39.7M in Series B Funding

“Having this ability to segment various businesses in a country with a lot of granularity and isolate pockets that are eligible for payment terms is a good way to close the funding gap in the economy and alleviate the liquidity issues that suppliers are facing. and buyers might face,” he noted.

Today, French provider BNPL, which is also available in the UK, France, Spain, Germany, Belgium and the Netherlands, has built a database of 40 million European businesses helping to guide their underwriting process.

Don’t break the online shopping experience

According to Carbonnier, another real problem for merchants is the lack of viable solutions to manage payment terms when selling online.

To solve this problem, some merchants try to reconcile some of the payment solutions in place, subjecting their business customers to a long process of applying for a business account via their websites, downloading and filling out forms, submitting financial statements and often waiting until at 48 hours. to hear the merchant approve the trade credit.

According to Carbonnier, “It shatters the whole online shopping experience. It’s not like an Amazon one-click checkout at all [customers are used to].”

On top of that, merchants have the added task of reconciling invoices and funds received and balancing them against their credit limits, while collating data from credit bureaus, collection agencies, and credit insurers that don’t. are not in real time.

Related: Hokodo puts BNPL at the service of UK B2B markets

“None of this allows you to provide instant credit decisions to your customers. [or] provide a seamless shopping experience on your website where the customer can select what they want to buy or instantly see if they qualify for trade credits,” explained Carbonnier.

Looking at recent data from McKinsey showing that 73% of today’s B2B buyers are millennials who prefer to shop online, he further underscored the need to provide the same smooth and seamless buying experiences that these young people enjoy. consumers are accustomed to.

“In their daily purchase at [marketplaces like] Amazon, these [millennials] have a great seamless experience, and then they come into the workplace, and they have to get themselves through email and blue screens. This [only] log out [bigger],” he added.

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About: Results from PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed responses from 9,904 consumers in Australia, Germany, UK and USA. and showed strong demand for one super multi-functional app rather than using dozens of individual apps.