B2C BNPL changed shopping – can international B2B BNPL players do the same for North American SMBs?

The United States is becoming a major market in the global buy now, pay later (BNPL) landscape. Klarna, the Swedish BNPL provider and one of the first to enter the North American market, identified the US as its largest B2C market in 2023.

BNPL’s growth in B2C paved the way,  but now, its emergence in B2B is positioning the US as an increasingly attractive market for international providers seeking growth.

Klarna also recently expanded its B2B BNPL offerings in the US through a collaboration with J.P. Morgan Chase, which is expected to be available later this year. This partnership will enable business clients using J.P. Morgan’s payments commerce software platform to access Klarna’s BNPL options, including short-term installment loans, providing more flexibility in managing business expenses. This is a significant step forward in Klarna’s ambitions to achieve deeper integration in the US market.

Getting to know ‘Two’

A new wave of European startups is actively pursuing expansion into the US B2B BNPL sector as part of broader international growth strategies. Among them is Two, a B2B BNPL firm planning its North American debut later this year.

Headquartered in Oslo, Norway, Two has operations in the United Kingdom, Norway, Sweden, and the Netherlands, through partnerships with Santander, Allianz, ABN AMRO, and Kredinor. 

The company is currently running a pilot program in North America as it prepares for a full-scale launch into the region’s BNPL market. While Two doesn’t yet have a physical footprint in the United States, it maintains an online presence through partnerships with Santander and Allianz, whose operations span the Americas, including the US.

Two’s roadmap for North American expansion

Two’s current pilot program offers trade credit solutions through its white-labeled Buy Now, Pay Later service and its installment product. These solutions are integrated into merchants’ checkout, existing financial workflows, and payment systems, enabling buyers to break large purchases over up to 24 months.

Andreas Mjelde, CEO & Co-Founder of Two, shares that the company is preparing to roll out its full product lineup in North America by the second quarter of 2025.

The full lineup will include:

• B2B BNPL embedded directly into guest checkouts, providing instant trade credit to businesses at the point of sale. Currently, BNPL is embedded in certain open and closed-wall checkouts.
• Trade Accounts that will enable businesses to consolidate multiple purchases into grouped monthly statements, simplifying payment management and cash flow oversight. 
• Extended installment plans, providing repayment options of up to 36 months for businesses managing larger transactions.

Two’s product lineup remains largely the same across the markets it serves, but it aims to localize its product suite for North American customers upon launch.

“These products will be meticulously tailored to the North American market,” notes Andreas. 

He explains that the firm’s localized approach incorporates regional credit risk assessments and personalized repayment experience targeting the specific needs of US-based companies.

“Our focus is to provide North American businesses with payment solutions that are as seamless and intuitive as consumer transactions. By combining advanced technology with local market insights, we are enabling merchants to increase conversions while reducing their risk exposure.”

Innovating with tech to break away from the pack: Two carves out its competitive edge by combining risk management, technology, and product depth. By shouldering both fraud and credit risk, it allows businesses to offer payment flexibility without exposing themselves to financial risk.

”Our proprietary risk models, Frida and Delphi, deliver high acceptance rates while minimizing friction for buyers,” says Andreas. This automation speeds up onboarding and boosts approval rates, without the need for hard credit checks.

Andreas shares that the firm has built its machine learning infrastructure and AI models in-house, with three years spent developing and refining them. “Today, we can launch and deploy our models in a new country in less than four weeks,” he says.

He further explains that the decision-making process is fully automated and has always operated that way.

“While most payment systems and credit underwriting processes allow for manual intervention, we made the difficult (and somewhat controversial) strategic decision to go fully automated,” he says.

Although building AI models required a considerable long-term investment, Andreas asserts that the outcomes have proven more effective. Human review is only integrated to evaluate any uncertain machine-generated decisions, contributing to the ongoing refinement of the scoring models.

Navigating the US-Europe divide in B2B BNPL and overcoming international scaling obstacles 

While the US B2B BNPL market presents significant opportunities for international players, it also brings challenges due to its highly competitive nature and distinct differences from other markets.

Klarna has been navigating the North American consumer BNPL market since 2015, but the journey hasn’t been easy. After years of losses, it finally turned a profit in Q3 2023, its first in four years. Klarna also demonstrated strong performance in the first half of 2024 and reinforced that its profitability was no fluke by delivering a strong Q3 in the same year. Reaching this point, however, took years of trial and error for the firm to adjust its strategy for the US market, initially prioritizing growth over profitability.

Reflecting on the differences between the US and European markets, Andreas notes that both share a strong appetite for B2B BNPL adoption, driven by the ongoing digital transformation of trade credit. 

He notes that the US market has potential with a vast total addressable market due to millions of SMBs finding it difficult to access flexible trade credit. He also sees a growing willingness and openness to embrace innovative tech-driven financial solutions in the US, fueling the adoption of alternative credit models like BNPL.

“US businesses are looking for better, faster ways to manage trade credit,” says Andreas.

At the same time, he also agrees that it’s not all smooth sailing. 

Navigating the US market is challenging due to:

i) Regulatory fragmentation, with state-by-state financial rules making compliance more complex than in the EU’s more standardized framework. 

ii) Rising competition from major financial institutions entering the B2B BNPL space further raises the bar for differentiation. 

iii) Limited access to comprehensive credit data on US businesses necessitates more advanced underwriting models, often relying on alternative data to assess risk effectively.

“Two addresses these challenges by leveraging its global bank partnerships, adapting its risk models, and focusing on merchant integration,” notes Andreas.

Andreas zooms in on the hurdles tied to strategy and shifting customer behavior that complicate the process for B2B BNPL firms scaling internationally:

i) Credit risk variability: Credit risk differs by region, as payment behaviors and creditworthiness fluctuate, making credit risk assessment more complex, and necessitating the need to develop localized underwriting approaches.

ii) Payment preferences: Smoothly integrating with merchants while ensuring smooth buyer adoption, which further requires an in-depth understanding of each market’s digital infrastructure and payment preferences.

“To tackle these challenges, Two is pursuing a phased expansion strategy, starting in US states with high digital payment adoption with the support of global banking partnerships, before scaling further,” says Andreas.

Although challenges remain, Andreas sees strong growth potential in B2B BNPL. Standardizing digital B2B payments and trade credit globally can lay the groundwork for scalable solutions that work across borders.

“Facilitating cross-border commerce presents a major opportunity — by simplifying international transactions and enhancing liquidity, a global B2B BNPL platform can become a key driver of business expansion,” notes Andreas.