There’s no use in sugarcoating it: things are tough in B2C Buy Now, Pay Later (BNPL) right now. Large-scale redundancies and devaluations at some of the biggest players, combined with renewed regulatory commitments from various governments, have led to uncertainty, volatility and mistrust in a payments space which, until very recently, was experiencing unmatched growth and success.
However, in B2B, the story is quite different.
Over the past few years, several promising startups have begun to offer BNPL solutions built specifically for business purchases. Of course, deferred payments are nothing new in B2B trade – for centuries, businesses have transacted on payment terms. But B2B BNPL presents a new way of offering this preferred payment method online; something which sellers have found complex or even impossible until now.
How it started
I was working at Euler Hermes, the world leading provider of trade credit insurance, when I realised that the product we were selling, while effective in many scenarios, suffered from two major downfalls:
Due to its complexity, trade credit insurance is all but inaccessible to SMEs with small finance functions. This is paradoxical as it is the small businesses who most need protection against unpaid invoices.
It works on a 48-hour cycle so is unfit for e-commerce where buyers and sellers demand real-time responses and a frictionless checkout experience.
And so, the idea to build Hokodo was born. With half of all B2B transactions now taking place online and a growing number of niche vertical marketplaces selling to SME buyers, the demand for a digital-first trade credit solution with lower barriers to access is only going to grow.
How it’s going
Since then, we’ve seen the arrival of a small pack of European paytechs attempting to bring BNPL to B2B, each with a slightly different solution but all with a shared goal of enabling businesses to access payment terms when they shop online.
Hokodo has emerged as the category leader for two main reasons.
First is our status as the first (and, so far, only) provider with a truly pan-European footprint. While our competitors are confined to just one or two regions, Hokodo is able to serve merchants and buyers in 6 of the continent’s biggest markets: the UK, France, Spain, Germany, Belgium and the Netherlands.
Second is our end-to-end tech, credit and analytics stack that we chose to build and operate entirely in-house. While our competitors rely on third parties for things like credit risk underwriting, we do this ourselves in order to provide flexible offer rates, maximum uptime and low latency, which our merchant partners love.
A critical service
One of the first clients to bring Hokodo’s BNPL solution to its buyers was European B2B marketplace Ankorstore.
Ankorstore’s founders knew that buyers and sellers transacting on the platform would benefit from payment terms, but only if they could be integrated seamlessly into the existing checkout. Hokodo was able to provide such a solution, and, since integration, Ankorstore has experienced better conversion rates, increased purchase frequency and higher average basket value.
“Hokodo is a very important part of our value proposition,” Nicolas D’Audiffret, Ankorstore Co-founder & CEO told us. “Payment terms are a critical service for us, for both our brands and our retailers.”
Since then, we’ve expanded into various industries such as construction (YardLink), food and beverage (Rooser, Katoo) and fashion (Paris Fashion Shops), implementing our solution with over 30 merchants and marketplaces via API or one of our e-commerce integrations. We’ve now enabled more than 33,000 businesses to access payment terms online, and this number continues to climb every single week.
The pandemic accelerated the adoption of e-commerce among B2B buyers and sellers, and, with 70% of buyers happy to make purchases of over €50,000 online, it doesn’t look like we’re going back to face-to-face sales any time soon.
Over time we’ll continue to see a growing number of businesses understand the benefits of transacting online, and Hokodo will be on hand to help facilitate the payment methods which buyers prefer but that sellers have so far struggled to offer digitally.
As this burgeoning area of B2B payments continues to gain traction, it’s important to remember that, while what we offer is, in theory, a BNPL solution for businesses, the reality is that it has a very different use case. Businesses have been trading on credit terms for decades, if not centuries. With 80% of transactions happening on credit, it is fair to say that BNPL is the default payment option in B2B. Furthermore, companies tend to minimise the Cost of Goods Sold (COGS) when they procure, and thus trade credit does not push professional buyers to purchase more than they need – contrary to how B2C BNPL has been criticised for encouraging consumers to purchase in excess. We of course welcome buyer protection for both consumers and businesses, but regulators must understand the nuances of these two distinct payment methods.
Hokodo exists to power the B2B digital economy, making it fair and accessible for buyers and sellers alike. We’re committed to enabling 1 million businesses to access a better way to pay by 2025, which feeds into our overall vision of a world where all companies have access to the financial tools they need to buy, sell and do more.