Reimagining BNPL for B2B payments | In conversation with Hokodo

March 14, 2024

In a recent conversation with Sania Kudaibergen, VP of Operations and People at Hokodo, we delved into the anticipated eCommerce-like transformation of B2B payments. We also discussed the recent introduction of Hokodo’s BNPL and ‘pay now’ B2B products, built on Airwallex’s robust global financial infrastructure…

First things first, what’s the gap Hokodo is looking to fill?

It’s no secret that eCommerce has become ‘the new normal’ in B2B. As an increasing number of digital natives have joined the workforce, the demand for digital procurement platforms has skyrocketed. These younger buyers bring with them expectations that have been informed by their experiences as consumers – they want purchases that are fast, simple and reliable.

But payments have struggled to keep up. In B2B, it’s standard practice for a seller to let their buyers purchase goods or services and pay for them at a later date. However, merchants have struggled to translate these payment terms into online settings, due to increased risk and the inherent complexity of B2B transactions.

Hokodo empowers merchants to offer flexible trade credit to buyers instantly at the point of need. We take care of every element of trade credit management from credit scoring and fraud detection to financing, payment processing and collections, so that buyers get the experience they expect while merchants can focus on the things that really matter to their business.

A lot of focus on BNPL in the early years was around driving B2C conversion, but why has it taken so long for a provider to offer B2B flexible financing?

There are a couple of factors at play here. First is the simple fact that a lot of innovative products and solutions are developed initially for B2C. Second is that B2B transactions and payments are far more complex than B2C.

In a B2C transaction, you have one decision maker – the customer – who buys based on emotion, has a relatively small basket size and pays a fixed price. Meanwhile, in B2B, you have several stakeholders involved in a transaction. Average basket sizes are a lot larger, and buyers often have personalised pricing and discounts. As we know, payment methods like trade credit add another layer of complexity.

However, it’s estimated that the B2B market is 2-3x the size of B2C, and buyers in this segment expect to be able to ‘buy now and pay later’ as standard, so there’s a big opportunity to make a genuine impact on countless businesses.

What’s wrong with traditional B2B payment terms/trade credit?

Traditional payment terms tend to be manual, offline and complex, with buyers having to manually fill out long forms and then waiting hours or even days to find out if they can get credit. Meanwhile, it can be really risky for merchants to offer credit off their own balance sheet – all it takes is one or two significant non-payments to cause serious cash flow issues.

The payment terms solutions that Hokodo offers are a safer, simpler and more supported way of offering trade credit that guarantees full payment for sellers and instant credit decisions for buyers.

Payments vs customer habits vs marketplaces or platform needs: Is it a smooth symbiotic relationship or is one a catalyst?

At the end of the day, it comes down to customer expectations and the way that sellers respond. We recently conducted a survey of 500 B2B buyers and found that 83% will abandon an eCommerce purchase if payment terms are not available at the point of need. We also learned that 98% of buyers face some kind of issue with online checkouts.

With such huge pressure and high customer expectations, buyers are often the catalyst in the development of new payment solutions or eCommerce platforms, but it’s down to marketplaces and merchants to provide the experience that buyers expect.

When you set out to build your proposition, what were you looking for in an infrastructure partner?

When we set out to find an infrastructure partner, there were a number of requirements that needed to be met. As you might expect, we had to consider how easy it would be to integrate the partner into our existing workflows and tools, as well as the cost-effectiveness of the solution. We also needed to make sure that the partner we chose would be able to scale alongside Hokodo now and in the future, and that they would be proactive in helping us to improve the payment experience for buyers. Last, but certainly not least, was a non-negotiable need for a partner with a robust approach to security and compliance. In Airwallex, we found everything we needed.

What exactly does Airwallex enable you to do?

In June last year, Hokodo announced its acquisition of an EMI licence that would enable us to help more merchants offer payment terms than ever before. We went from operating in 6 countries to having the potential to serve the B2B market across the entire EU and the UK. Airwallex has been invaluable in helping buyers across Europe to pay on their terms and via the settlement methods most relevant and suitable for them. The Airwallex partnership has been pivotal in unlocking additional product functionality for Hokodo and rolling out our ‘Pay Now’ solution.

Looking ahead, how will better B2B payment terms benefit the macroeconomy?

Considering the size of the B2B segment, there is no question that payment terms solutions like those offered by Hokodo will help benefit the macroeconomy. Small and medium-sized enterprises (SMEs) and sole traders make up the vast majority of businesses but are often blocked out of trade credit schemes. With improved access to payment terms, these businesses are able to buy what they need, sell more and reach their growth targets.

Industries, where buyers and sellers have a predisposition for payment terms, are those likely to experience the largest benefits – in sectors like food and beverages, construction, agriculture and automotive, almost all B2B transactions take place on terms, so an improved, digital version of the credit they already use is going to have a hugely positive impact.

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