Anubhav Jain is co-founder and CEO of Rupifi, India’s first embedded lending fintech. He has greater than a decade of expertise in credit score danger, analytics, buyer administration and portfolio growth.
Each as a time period and as a monetary product, “purchase now, pay later” has turn into mainstream prior to now few years. BNPL has advanced to imagine numerous types immediately, from small-ticket choices by fintechs on client checkout platforms and marketplaces, to closed-loop merchandise supplied on marketplaces resembling Amazon Pay Later (which they’re now extending for outdoor use as effectively). You too can see some variants supplied by firms that wish to broaden the scope of consumption and client credit score.
Globally, BNPL has seen essentially the most progress within the client phase and has pushed retail consumption and lending over the previous few years. Shopper BNPL choices are a very good different to bank cards, particularly for individuals who shouldn’t have a credit score historical past and may’t get credit score from banks. That stated, a selected vertical of BNPL merchandise is gaining traction — one focused towards small and medium enterprises (SMEs). This new vertical is named “SME BNPL.”
BNPL will be notably helpful when flow-based underwriting or transaction-based underwriting is used to supply credit score to small companies.
B2B commerce in India is transferring on-line
E-commerce has seen large progress in India over the previous decade. Skyrocketing smartphone and web penetration led to fast progress in e-commerce throughout massive cities and smaller cities alike. Shopper credit score has additionally taken off in parallel as bank cards and digital lending spurred credit-based consumption throughout offline and on-line shops.
Nonetheless, the massive B2B provide chain enabling the burgeoning retail market was tormented by bottlenecks and inefficiencies as a result of it concerned a plethora of intermediaries and streamlining turned a giant downside. Quite a few tech gamers responded by organizing the beforehand disorganized B2B commerce market at numerous contact factors, inserting comfort, pricing and simpler product entry by way of tech-enabled logistics and a contemporary provide chain.
India’s B2B e-commerce house has developed quickly since 2020. Small companies have moved from utilizing paper to smartphone apps for working a major a part of their day-to-day enterprise, resulting in widespread disruption in how companies transact immediately. The COVID-19 pandemic additionally compelled small companies, which had been earlier utilizing bodily means to acquire items and providers, to strive new and on-line fashions to conduct their affairs.
Furthermore, the Indian authorities’s widespread promotion of an immediate funds system within the type of the Unified Funds Interface (UPI) has modified how folks ship cash to one another or pay retailers for his or her items and providers. The subsequent step for fixing the digital B2B puzzle is to embed credit score inside each transaction and bill.
If we examine on-line B2B transactions to the offline world, there is just one lacking hyperlink: The phrases supplied to small companies by their provider/distributor or vendor. Companies, not like shoppers, should purchase items and providers to finally commerce them, or add worth and promote to shoppers or others down the worth chain. This course of will not be fast and has a sure time cycle hooked up.
The longer gross sales cycle means many small companies require credit score fee phrases when shopping for stock. As B2B commerce scales and grows by way of digital means, a BNPL product that caters to the wants of SMEs can assist their progress and alleviate the burden on their money flows.
How does client BNPL differ from SME BNPL?
An SME BNPL product is a purchase order financing product for small companies transacting with suppliers, distributors, aggregator platforms or B2B marketplaces.