Financial services alliance offers BNPL to multinational global retailers

Following on from the launch of a buy now, pay later (BNPL) offering for small and medium-sized enterprises (SMEs) last year, Allianz Trade, Santander CIB and B2B e-commerce platform Two have expanded their service to include large multinational corporations. 

The new offering provides a deferred payment service for B2B e-commerce. It will be distributed worldwide to enable large corporations to offer deferred payments without being exposed to non-payment risks. Under the partnership, Allianz Trade assesses credit requests instantly using its global database of some 80m corporates. This in turn helps Santander CIB to make immediate finance decisions.

Until now, large multinationals have had few options when looking to offer real-time payment terms to their buyers at the point of checkout while offloading the risk and working capital cost, according to Ignacio Frutos, global head of receivables at Santander CIB. 

B2B trade is moving online, he says, citing research which suggests that in 2021, manufacturers grew e-commerce by 18.4%. Sixty-five per cent of B2B companies are only selling online.

However, B2B dedicated payment methods are not keeping pace, explains Mr Frutos. “In North America, some 42% of B2B payments are still done via cheque,” he says. “Cards are typically ill-equipped to satisfy the needs of B2B payments such as large order values offering payment terms and attractive pricing. Only 2% of global B2B payments are on cards. Invoice is typically the payment method of choice, but merchants need a solution for risk, funding and the operational burden.”

The new BNPL product for multinationals aims to accelerate the digitisation of B2B trade with a payment method that offers business buyers instant payment terms, he explains. 

“The options are almost non-existent when looking for a provider that can handle sophisticated API integrations, global coverage, cross-currency capabilities and funding scale to support their needs,” says Mr Frutos. “This results in multinationals insourcing the operational burden, investing resources into non-core areas such as credit underwriting, dunning and reconciliation, and taking the risk on the balance sheet.”

A seamless experience

Özlem Özüner, e-commerce head of operations and finance at Allianz Trade, says the new service is “a perfect example of embedded finance cooperation between an insurer, a global bank, as well as a tech provider, to enable buyers to come online to purchase goods or services from web stores or web shops, and for those buyers to get deferred payment terms”.

She says it is a one-stop service for large companies to offer their buyers instant deferred payment. “At the point of checkout, the online journey is concluded by providing different payment terms for the buyer,” she explains. “It creates an alternative to existing payment methodologies. For large multinationals, it's quite a seamless journey [from joining] the programme to [getting] the financing right away and [increasing] wallet size: the programme opens their sales to any buyer that might come to the platform to shop.”

Andreas Mjelde, CEO and co-founder of Two, who claims the partnership behind the B2B BNPL service is the most important the company has yet been involved in, says that globally businesses have been essentially taking on the job of the buyers’ banks. “If you extend your buyers 30-, 60- or 90-day payment terms and you make £1bn in sales per year, you might be extending £100–200m [in] loans to your customers. This is not your core capability,” he stresses.

“Our solution makes it much easier to access customers across markets, not just your own market, to shift sales online,” he adds. 

The total global cost to accounts payable (AP) is estimated at $2.7tn, according to Mr Frutos. “Half of traditional AP costs are due to the manual overlay needed to process payment. In addition, for merchants to offer payment terms, they need to incur the cost of underwriting, dunning, funding and, ultimately, risk, which only increases the cost.

“Merchants can reduce underwriting from several hours to instantaneous approvals with our solution,” he claims.

The biggest hurdle in creating this payment solution was the complexity of developing a seamless experience across multiple countries with different currencies, legal frameworks, regulatory requirements and languages, according to Mr Frutos. “In addition, the solution needs to take into account that there is no one-size-fits-all in B2B. Different industries have different needs, which adds additional layers of complication,” he says.

Breaking down barriers to growth

Ms Özüner adds: “When we embarked on the SME BNPL journey last year, we saw a lot of traction from mid-size sellers becoming part of the programme. Most of the SMEs were very much used to paying with credit card or with cash, which sometimes limits their capability to make more purchases.”

With the BNPL option through Allianz Trade, Ms Özüner explains, these buyers can increase their basket size and sellers can enjoy more sales. “We have seen that this partnership worked perfectly in the mid-size and SME arena. And this kind of encouraged us to speak to the global players like Santander for larger companies, because we could see that this was the preferred option.”

Mr Mjelde says that the new B2B BNPL system overcomes the fact that business buyers are purchasing but not paying, which he refers to as a massive barrier to growth. “The latest report from the [European Commission] estimates that 6.5 million jobs across the eurozone are lost owing to businesses waiting to get paid,” he says. “It’s a flawed system where you as an operating business take on the job of the bank,” he adds.

Ms Özüner concludes: “I think BNPL growth is just beginning, marking the beginning of disruption around traditional means of e-commerce sales. We are making the first steps. And it’s important to provide the whole spectrum of customers the same solution, from very small-sized customers to large multinationals.”