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Buy-now-pay-later firms are shifting businesses from Gen Z shoppers

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Fresh from Gen Z’s buy-now-pay-later buying habits, firms are now targeting business payments as the next sector poised for disruption.

Startups such as Billie, Mondu, Tranch and Tillit offer BNPL solutions – which allow buyers to pay in installments – and provide short-term loans to companies in an effort to secure a slice of the $700 billion industry. helping them manage their daily affairs.

The use of short-term credit, particularly through supply chain financing, has been a lifeblood for companies dealing with a range of issues from Covid-19-related lockdowns to rising input costs in an inflationary environment. With few tech entrants to the sector — and the spectacular failure of Greensill Capital — the industry remains dominated by established lenders such as Britain’s Barclays Plc and HSBC Holdings Plc and Germany’s Deutsche Bank AG.

Pure-play BNPL firms have seen their valuations tumble this year as rate hikes around the world test the viability of their business models. But the ease of use of such originations is proving to be the winning formula for older loan products in this segment of the market.

“These B2B BNPL companies can easily take market share from slow-growing traditional banks,” said Lily Shaw, an early-stage investor at North American venture capital firm Omers Ventures, which is currently uninvested in the sector but is actively looking at it. “The risk profile of the banks is set in such a way that they cannot move fast enough.”

Berlin base

Billy and Mondu approach the model through the lens of BNPL; Offering the same experience to small businesses when buying office supplies as a fashion designer would when buying a Gucci bag with Klarna or Afterpay.

“If a typical business-to-consumer transaction on BNPL is around 80 to 90 euros, our typical transactions are around 10 times that,” said Aiga Senftleben, co-founder of Sequoia-backed Billie. The company is located in Berlin. Valued at $640 million in its latest funding round, it works with banks as financing partners and currently operates in Germany, Austria and Sweden.

Mondu co-founder Malte Huffman said he hopes to enter the trade finance space, especially given that more and more business transactions are taking place online. “We believe there is a $200 billion market opportunity for B2B BNPL in Europe and the US,” he said.

In Germany alone, for example, 200 billion euros ($204 billion) were completed in e-commerce in 2021, compared with 86.7 billion euros in business-to-consumer e-commerce, according to research firm Statista. .

Growing pains

Despite the sharp drop in valuation, Klarna, Afterpay Ltd. and Affirm Holdings Inc. companies like BNPL have shaken up the e-commerce sector with consumer-friendly apps and popularity among 18-24-year-olds, forcing out many traditional banks like Natwest Group. Plc to launch competing bids.

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This is the advantage of B2B BNPL startups, Bain & Co. According to Geoff Thiessen, global head of fintech at the consulting firm, traditional banks may retreat from the sector amid a worsening economic outlook, thereby reducing competition.

“It solves some major cash flow issues for the business, and you have big investors like Sequoia and Klarna,” he said. “A slowdown in the economy gives them opportunities, but can have a negative impact. It’s still early days. .

This story was originally published by the wire agency without text changes.

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