Latest / Fintech Conversations with Fexingo: Banking, Payments, and Financial Software Companies / How Fintechs Are Using BNPL for B2B Procurement
Transcript
- Lucas: If you run a small business, you've probably used buy now pay later as a consumer — splitting a pair of sneakers into four interest-free payments. But the fastest-growing BNPL segment right now isn't for sneakers. It's for office supplies, industrial parts, and software subscriptions. Luna: B2B BNPL. I've been seeing the term pop up more and more. So instead of Klarna or Affirm at the fashion checkout, we're talking about companies like Billie and Hokodo offering net-30 terms to other businesses? Lucas: Exactly. And the scale is surprising. According to a Juniper Research report from early 2026, the global B2B BNPL transaction value is expected to hit six hundred and eighty billion dollars by 2028. That's up from roughly one hundred and fifty billion in 2025. Compound annual growth rate of about thirty-five percent. Luna: That's a much higher growth rate than consumer BNPL, which has been slowing down as regulators crack down on late fees and credit risk. So what's driving businesses to adopt it? Lucas: A few things. First, traditional trade credit is still surprisingly manual. A small manufacturer wanting to buy raw materials on net-30 terms usually fills out a PDF credit application, faxes it — literally faxes it — then waits a week for a credit check. B2B BNPL fintechs automate that whole process. They connect to the buyer's accounting software, pull transaction history, and approve a credit line in under a minute. Luna: And on the supplier side, they get paid upfront — minus a fee — instead of waiting thirty or sixty days. That's a huge cash flow improvement for small suppliers. Lucas: Right. The model is basically the same as consumer BNPL: the fintech pays the merchant immediately and collects from the buyer in installments. But the underwriting is much more sophisticated because business credit data isn't as standardized as consumer credit scores. Luna: So they're using AI to analyze bank transactions, invoice history, even social media signals? I read that Hokodo looks at over two hundred data points per application. Lucas: Yeah, and Billie, which is one of the bigger players in Europe, uses machine learning models trained on millions of transactions. They claim their default rate is below one point five percent, which is better than many consumer BNPL lenders. For comparison, Affirm's net charge-off rate was around two point eight percent last year. Luna: That's impressive. But B2B also has higher average order values. A consumer BNPL transaction might be one hundred dollars. A B2B transaction could be five thousand dollars or more. Does that change the risk profile? Lucas: It does. That's why most B2B BNPL fintechs cap their credit lines at around fifty thousand dollars per buyer to start. They also use dynamic credit limits that adjust based on real-time payment behavior. If a buyer pays early, their limit increases. If they're late, it drops. Luna: Kind of like a credit card issuer adjusting your limit based on spending patterns, but more automated. Lucas: Exactly. And the technology stack is different. Consumer BNPL typically integrates with e-commerce platforms like Shopify or Magento. B2B BNPL needs to integrate with procurement systems like Coupa, SAP Ariba, and NetSuite. It's a more complex integration, but the stickiness is higher because once a supplier offers BNPL at checkout, the buyer is less likely to switch to a supplier that only accepts wire transfers. Luna: So it's a competitive advantage for the supplier. Let's talk about a concrete example. Billie recently announced a partnership with a European industrial parts distributor. Can you walk through how that works? Lucas: Sure. The distributor lists Billie's payment option at checkout. A small plumbing company orders two thousand euros worth of pipes. At checkout, they choose 'pay in 30 days'. Billie runs a soft credit check in the background — pulls data from the buyer's bank account via open banking APIs, checks their business registry, and looks at past invoice payment patterns. Approval takes about ten seconds. Luna: And the distributor gets paid immediately by Billie, minus a fee that's typically two to three percent of the transaction. Lucas: Yes. The buyer then pays Billie in full after thirty days. If they want to split into three installments, Billie offers that too, with a small interest charge. The fintech makes money from the merchant fee and the interest on installment plans. Luna: What about the regulatory side? Consumer BNPL has faced scrutiny in the UK and US for not being transparent about late fees. Is B2B BNPL facing similar pressure? Lucas: So far, less. Business borrowers are generally considered more sophisticated. But the UK's Financial Conduct Authority did issue guidance in early 2026 saying that B2B BNPL products that offer deferred payment without interest may still fall under consumer credit rules if the buyer is a sole trader. So the lines are blurring. Luna: Interesting. And there's the question of data privacy. When you connect a business bank account to a fintech, you're giving them access to all your transaction data. Some buyers might be uncomfortable with that. Lucas: Right. But the fintechs argue that they only read transaction metadata — amounts, dates, counterparties — not individual line items. And they use encryption and tokenization so the data isn't stored in plaintext. Still, it's a trust barrier that takes time to overcome. Luna: Let's zoom out. How does B2B BNPL compare to traditional trade credit insurance? A supplier could buy credit insurance to protect against non-payment, but that's expensive and doesn't help with cash flow timing. Lucas: Exactly. Trade credit insurance typically covers sixty to eighty percent of the invoice value if the buyer defaults, but it doesn't accelerate payment. B2B BNPL is essentially combining credit insurance with factoring — the fintech takes the credit risk and pays the supplier upfront. That's a compelling value proposition for small suppliers who can't afford to wait sixty days for payment. Luna: And it's not just small suppliers. I read that even some mid-market manufacturers are starting to offer BNPL to their distributors as a way to compete against larger rivals with deeper pockets. Lucas: Yeah, I saw a case study from Hokodo where a French plastics manufacturer increased its conversion rate by twenty-two percent after offering BNPL terms to its dealers. The average order value also went up because dealers were willing to buy more when they could pay later. Luna: That's a concrete number. Twenty-two percent lift. So this isn't just a nice to have — it's a growth lever. Lucas: Absolutely. And the technology keeps improving. Some fintechs are now using generative AI to draft customized payment plans based on the buyer's cash flow patterns. For example, if a buyer's revenue is seasonal, the AI might suggest a plan with lower payments in slow months and higher payments in peak months. Luna: That's more flexible than a standard net-30 term. It's almost like dynamic trade credit. Lucas: Exactly. And it's all happening in real time. The fintech's platform analyzes the buyer's bank account, suggests a plan, and the buyer clicks accept. No human intervention. Luna: I want to talk about the competitive landscape. Who are the main players besides Billie and Hokodo? Lucas: In Europe, you have Billie based in Germany, Hokodo in the UK, and also a company called Mondu, which focuses on B2B BNPL for marketplaces. In the US, there's Melio, which started as a B2B payments platform and now offers BNPL features. And there's Tranch, which targets software companies selling to other businesses. Luna: And Stripe is also getting into it. They launched Stripe B2B BNPL in beta last year, integrating directly with their payment processing. That could be a game changer because Stripe already has millions of merchants. Lucas: Right. Stripe's version is interesting because they underwrite based on the merchant's existing transaction data, so they can approve buyers more quickly. But they're still in beta, so we don't have default rate data yet. Luna: I also heard that some traditional banks are piloting their own B2B BNPL products. JPMorgan Chase, for example, launched a pilot with select corporate clients last quarter. Lucas: Yeah, the banks see it as a way to retain commercial clients who might otherwise switch to fintech lenders. But their cost structure is higher, so their fees are typically one to two percent higher than pure-play fintechs. Luna: Speaking of costs, one of the criticisms of B2B BNPL is that it can encourage businesses to take on debt they don't need. If a company can pay upfront but chooses BNPL to preserve cash, that's smart. But if they're using it because they're cash-strapped, it could mask underlying financial problems. Lucas: That's a fair point. The fintechs argue that their underwriting models are designed to catch over-leveraged businesses. But there's always a risk of adverse selection — the businesses that want BNPL the most are often the ones with the weakest cash positions. Luna: And if the economy slows down, default rates could spike. We saw that happen with consumer BNPL during the 2022 inflation spike. What's the stress scenario for B2B BNPL? Lucas: The fintechs have run models assuming a recession similar to 2008. Billie's stress test showed that even if defaults tripled, they'd still be profitable because their margins are high enough. But that's one company's model. Independent analysts are more cautious. A report from Moody's in April suggested that B2B BNPL portfolios could see loss rates of five to seven percent in a severe downturn. Luna: That's significant but not catastrophic. And the fintechs can adjust credit limits quickly because they're automated. Lucas: Exactly. One of the advantages of an ai driven underwriting system is that you can tighten credit in real time based on macroeconomic signals. If the Fed raises rates, the model can immediately reduce approval rates for certain industries. Luna: Let's talk about the buyer experience. I've used consumer BNPL and it's seamless — one click at checkout. Is B2B BNPL as frictionless? Lucas: It's getting there. The best implementations integrate directly into the procurement workflow. For example, if you're buying through a Coupa portal, the BNPL option appears as a payment method alongside credit card and wire transfer. You select it, the system prompts you to connect your business bank account via Plaid or an open banking API, and within seconds you have a credit decision. Luna: So the buyer doesn't have to create a separate account or log into a different platform. Lucas: Right. That's the ideal. Some incumbents, like the traditional trade credit providers, require the buyer to fill out a separate application and wait for approval. That's why fintechs are winning market share. Luna: I want to touch on cross-border B2B BNPL. If a US company wants to buy from a German supplier, can they use BNPL? Lucas: It's tricky because of currency risk and different credit reporting systems. But some fintechs are tackling it. Billie, for instance, offers BNPL in multiple currencies and uses foreign exchange hedging to protect against currency fluctuations. They also partner with local credit bureaus to verify buyer identities. Luna: So it's possible but more expensive. The fees are typically three to five percent for cross-border transactions, compared to two to three percent for domestic. Lucas: Yes. But for a supplier who can't get traditional trade credit insurance for cross-border sales, it's still a good deal. Luna: I want to bring this back to the listener who runs a small business. Is B2B BNPL something they should consider offering to their customers? Or using themselves? Lucas: If you're a supplier, offering BNPL can increase conversion rates and average order sizes, as we saw with that French manufacturer. But you need to choose a reputable fintech that integrates with your accounting software and doesn't charge exorbitant fees. The typical merchant fee is two to three percent, which is comparable to credit card processing fees. Luna: And if you're a buyer, using BNPL can improve your cash flow, but only if you have a clear plan to pay on time. Late fees can add up. Lucas: Exactly. It's a tool, not a crutch. And the best fintechs are transparent about fees and terms. Luna: By the way, if you're running a business and thinking about how to optimize procurement or payment terms, this kind of practical insight is exactly why we do this show. If today's episode was worth a coffee to you, you know the link — buy me a coffee dot com slash fexingo. No pressure, just appreciation. Lucas: Yeah, listener support keeps this ad-free and focused on what matters for people building and running businesses. So thank you. Luna: Alright, back to B2B BNPL. One more trend I want to explore: embedded finance. We're seeing B2B BNPL become a standard feature in procurement software, not just a separate checkout option. Lucas: Right. Coupa now offers a native BNPL feature through a partnership with a fintech. That means buyers never leave the Coupa interface. It's fully embedded. That's where the market is heading — BNPL as a feature of the procurement platform, not a separate payment method. Luna: So in a few years, will we even use the term B2B BNPL, or will it just be 'payment terms'? Lucas: Probably the latter. Just like we don't say 'buy now pay later' for credit cards — we just call them credit cards. The technology becomes invisible. Luna: That's a good note to end on. Thanks, Lucas. Lucas: Thanks, Luna. And thanks to our listeners. See you next time.