The appeal to consumers was clear – breaking lending down into multiple fixed payments with a clear repayment schedule, along with many providers offering zero interest on three-month plans, made buying now and paying later an enticing prospect. Those with limited capital but regular income were able to increase their short-term spending power, while retailers were able to benefit from increased commerce as a result.

It is, as ever, critical to point out that BNPL is not a license to spend without caution – like all credit products, if misused they can quickly generate unmanageable debts and severely damage one’s credit rating. If used properly, it can grant consumers the power to reach short term goals and increase their financial wellbeing.

With an estimated 15 million adults of all ages in the UK actively using this form of credit – an increase of more than two million since the start of the year –  it is clear that BNPL for consumers is now here to stay. And while the initial boom of uptake may slow, it is likely that we will see more B2C products and providers emerge onto the scene in the coming year. However, it is not B2C that will be the next major step for BNPL – as the next space that is likely to experience a major shift is B2B.

From one business to another

Just as consumers stand to benefit from the convenience and flexibility of BNPL solutions, startups and SMEs can look to this new form of lending as a means of improving their own financial situations. Financing for small businesses has always been a tricky matter, with many hoops to jump through, long delays, and a lack of flexibility all commonplace. Liquidity can grant a business a degree of insulation against unforeseen obstacles, but sadly most simply do not have enough capital to be that resilient.

Take a subscription-based SME – even with a small pool of subscribers, they have a regular stream of revenues that make long-term financing decisions simpler, but in the short-term they are unlikely to have much squirrelled away. Many startups rely on funding rounds and incubators to provide much-needed flexibility, but overreliance on these sources of financing can stunt organic growth as funding is often reserved for higher priority businesses or activities.

This is what makes BNPL for Business so appealing – the ability to secure frictionless and transparent finance simply, without going through the rigours of conventional business borrowing. Small businesses with financial experts on hand will appreciate the flexibility and clarity on offer. Used carefully, BNPL can help businesses level up on their own terms.

As BNPL for business lenders emerge into the finance ecosystem, the available benefits signal that we could soon see similar growth in the B2B space as we have in previous years with B2C – while the increased cash flow management and short-term spending power could drive major development within the SME space.

Behind the curtain

As was the case with the B2C BNPL boom, a driving force behind the astonishing rate of innovation has been Banking as a Service (BaaS). By simplifying the process of setting up seamless and scalable lending solutions to the point where any enterprise – financial or otherwise – can set up their own product, the variety and scope of available tools can increase exponentially.

More products with customisable features and terms mean that traditionally underserved demographics can benefit from solutions that are tailormade to their needs. The one-size-fits-all lending solution is a thing of the past, as many are excluded by their catch-all approach. 

Just as BNPL products can be created specifically for SMEs, the ease-of-use of modern BaaS products means that SMEs can create their own BNPL solutions rather than offering a third-party one, increasing stickiness and creating alternative revenue streams.

BNPL usage almost quadrupled in 2020 alone in the UK, with transactions totalling £2.6b. The benefits should not be reserved for unicorn fintechs and major retailers – SMEs and startups should take full advantage of this booming market and ensure their own success with BNPL for business.

The view in 2022

This year, we are likely to see the continuing trend of BNPL making its way into the purchasing journeys of major retailers. SMEs and startups that follow in the footsteps of their mammoth counterparts are not guaranteed the same benefits, but given the instability of recent years, those with the will to succeed are not in a position to ignore opportunities in this space.

The success of new and growing businesses is an encouraging metric of the future health of our economy, and as such BNPL for business may be a source of genuine optimism in the coming years. The question for smaller enterprises is whether they will take part in this new wave of split payment solutions, or whether they will be left behind.