Embedded Briefing: Bright prospects for B2B payments; BNPL attracting investments
- As SMBs increasingly adopt e-commerce solutions for purchasing, payments methods like B2B BNPL are becoming more attractive.
- Given that delayed payments are a regularity in the industry, the BNPL protocol can add a valuable option to the existing standards.

BNPL has found a cozy home in consumer markets. In the B2B trade, however, the payment innovation has been less relevant, though that’s changing fast. With the ambition of leaving a lasting impact on trade finance, many startups, new and old, are now invested in bringing BNPL to businesses.
And that comes as little surprise. B2B spending is one of the biggest markets for financial services in the world, worth around $27 trillion in 2021 in the US alone, and businesses are constantly looking for more flexible payment mechanisms.
Given that delayed payments are a regularity in the industry, the BNPL protocol can add a valuable option to the existing standards. This is especially true for SMBs, which already have very limited choices.
“Small businesses rely on flexible credit and payment tools to grow. The traditional sources of capital for SMBs, like big banks, are under-serving this market,” Credit Key Co-Founder and CEO, John Tomich, told Tearsheet. “Simultaneously, the rapid growth in the B2B e-commerce space, now twice the size of B2C, has opened up a tremendous opportunity for digital point-of-sale financing tools like Credit Key to address these needs.”
Credit Key is one of the firms that’s working on bringing B2B BNPL to SMBs at ecommerce points of sale. Recently, the firm announced that it had secured a new debt facility of $100 million from the Fortress Investment Group. As part of the deal, that facility can be expanded to $150 million upon mutual agreement.
Additionally, the firm also secured a $15 million equity round led by RedBird Capital, Bonfire Ventures, and Greycroft.
Other B2B financial service providers have also spotted the opportunity. For example, Ampla Technologies also just acquired B2B BNPL provider Upside Financing.
While the economy is recession-bound and fintech investments are shrinking on average, this interest in B2B BNPL is interesting. It indicates that not only do businesses demand BNPL, but investors also see value in those serving it.
In fact, BNPL has been around for quite some time as a concept in trade finance – businesses are familiar with needing access to finance in order to pay their suppliers or access goods and services to grow their business.
E-commerce data has also made it easier for SMB lenders, like Credit Key here, to underwrite loans by providing data that remains unavailable to traditional lenders.
“From a product development perspective, this digital channel allows us to receive real-time feedback and analytics from our SMB borrowers for risk scoring, to maximize conversions, and deliver the most optimized product experience. We monitor feedback through metrics like NPS and TrustPilot closely.,” Tomich said.
Having said that, it is worth noting that leaders in B2B BNPL see themselves more as payment solution providers than as a lender. “Even though there is a credit component to it, we tend to think of what we do as primarily oriented on B2B payments,” Chris Tsai, founder, and CEO at Resolve told Tearsheet.
Reflecting back to the early days of B2B POS lending, he recalled being approached by Affirm – then a pre-market fit baby startup – to experiment with online installment loans at check-out for businesses. Tsai was running a pre-order business payments company then, where Affirm founder Max Levchin was an angel investor.
“At the time Affirm was looking for a partner e-commerce platform that would be willing to trial this idea of an installment loan in a checkout. They were looking to prove that this online version of an installment loan made any sense, and we just happen to have dozens of merchants who were eager to grow and were willing to experiment,” Tsai said.
Their experiment found that such installment loans had a positive impact on businesses, helping them increase sales by 20% - 30% on average. However, Tsai and the team believed the real value of their solution came from simplifying how business transactions are done.
It’s no secret that business payments are lengthy and complicated.
In a B2B transaction, the CFO or controller on both the buyer and seller sides have to make sure their purchase falls in line with where their accounts payable and accounts receivable stand. That’s a lot of paperwork and a lot of different approvals.
The buyer needs to plan a payment schedule such that it does not overwhelm their books. The seller, on the other hand, has to do extensive work to gauge the creditworthiness of the buyer and find a mutually beneficial payment schedule.
With B2B BNPL, these things are catered to. The payment provider settles a pre-set payment schedule and assumes the risk on behalf of the seller. For the buyer, the provider uses data from their business to set a loan limit.
In a growing trend, B2C BNPL providers are entering the B2B market. Klarna, a major B2C BNPL player, recently entered into a partnership with B2B BNPL provider Billie to bring the latter's services to its merchant partners. This brings the firm into competition with others in the space like Resolve and Behalf.
Changing business preferences indicate brighter days for B2B payments are approaching. Entrepreneurs and investors are cognizant of that, and new solutions are rushing into the as-yet-not-so-populated market.
Chart of the day
Source: Unit
Embedded business lending is as yet an untapped market, and experts believe it could be very lucrative.
Companies can use their existing relationship with their customer base by offering financing products. If done right, it can mean an improved experience for the customer that generates additional revenue
One example of embedded lending includes cash advances, whereby lenders grant businesses early access to revenue in exchange for a discounted share in future revenues.
Platforms like Uber are best suited for such an offering, as they are already aware of their customers’ revenues, and can accurately predict whether they’ll be able to pay back a certain amount in time. As these borrowers operate directly on the lender’s proprietary platform, it is also simpler to collect the loan.
Then there’s invoice factoring, where lenders give borrowers a lump sum payment and in exchange collect their future invoices at a discounted price. For example, a lender may give a borrower $45,000 today, and in turn, collect an invoice worth $50,000 two months later.
Credit and charge cards are pretty self-explanatory. Lenders here make money from transaction fees and accrued interest.
There’re also term loans. They are pretty much like regular loans. Borrowers take the money and pay it back over a pre-set period of time, with a pre-set interest rate. Lastly, we have revolving loans. Here, a lender grants borrowers a certain limit within which they can take out over time, and pay back over time. Timely payments often result in an extension of the limit.
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