Paradoxically, or paradoxically, when the B2C segmented pay-as-you-go (BNPL) sector enters a perturbation zone the BNPL B2B starts to take off. While the first is facing a growth crisis accompanied by difficulties in refinancing in the context of declining stock market valuations and inflation, the second is attracting investors and structural.
The sector’s largest fundraising campaign, by Mondu, was unveiled on Monday, May 30. The Berlin-based startup has closed a $43 million Series A funding round, led by the US fund Peter Thiel Valar Ventures, backed by Cherry Ventures and FinTech Collective, as well as several business sponsors from Klarna, Zalando and SumUp. Mundo had amassed 14 million works seven months ago.
The emergence of specialized financial technology companies
Last week, Britain’s franchise agreement, which targets companies using SaaS software by allowing them to distribute annual subscription payments, less than a monthly subscription, raised £3.5m in prepayment.
Other players in the sector include German Billie, who raised $100 million in Series C in October 2021, notably from BNPL B2C heavyweight Klarna. Or British Hokudo and American intent.
In France, Alma, one of the main players in the retail payments segment, intends to develop in the field of B2B. Hero, a fintech company founded in September 2021, has already entered the market. It has raised €1.8 million from Business Angels (Qonto, Stripe, Adyen, etc.), supplemented by a €5 million line of credit from Avelinia Capital, which forms a debt securities fund to finance it. In 2022, the startup will be able to fund 60 million euros in transactions.
Just as payment in installments existed long before fintech in retail, deferred payment is the foundation of customer-supplier relationships in the B2B world. On average, customers in France pay more than 60 days. This is a problem. Payment delays are already the cause of frequent cash flow difficulties for suppliers, who struggle to keep their working capital steady. In France, where more than half of bills are paid late, 25% of SME failures are due to late payments.
“BNPL B2B interest is to free up cash on bills owed to companies, to get them back in business”, explains to L’Usine Digitale Roland Jais Nielsen, Founder and CEO of Hero. BNPL platforms allow suppliers to receive amounts owed to them instantly. According to Philip Bofill, co-founder of Mondu, the BNPL B2B market is $200 billion in Europe and the United States.
Debit and Credit Insurance Update
These new financial technologies provide more modern solutions by “consuming” short-term financing means such as factoring (waiver of receivables) or bank discount, which are difficult to set up. In Hero, for example, invoices go through the startup’s API to be sent to the debtor (whether sold online or offline), who receives the payment link. In the end, the startup will also provide the buyers with the opportunity to take advantage of the payment facility. Its business model is based on commissions ranging from 1.5 to 3.9% depending on billing due date, size, means of payment and sector.
On the other hand, the restrictions are heavier than in BNPL B2C. First, in terms of checking the solvency of the debtor, which requires more complex scoring. Second, because the amounts at risk are higher and require more funding from the fintech side.
French technology in the forum
Hero has over 130 clients to date, including Dessange Group and fashion wholesaler eFashion Paris. The 14-person startup plans to raise new donations in 2022, and hire about fifteen new employees. Soon it will launch a BNPL solution for in-store purchases.
Other French fintech companies are approaching the issue of B2B payment deadlines from other angles. This is the case of Kresus, with its automated trade discount solution (discount granted according to the payment period), and Defacto, which gives credit to small and medium-sized businesses by paying their bills, which buyers pay later.