How Merchant BNPL is making small business owners’ life simpler


Customers and investors loved Buy Now, Pay Later (BNPL), and fintechs like Affirm, Klarna, and AfterPay saw high valuations and client inflows all over the world.

Small businesses are increasingly using Merchant BNPL to make purchases from suppliers. Consumers have real-time credit experience, which business owners demand.

Following are a few developing developments that will propel Merchant BNPL forward:

Small business owners are abandoning paper in favour of digitally managing sourcing, shipping, and financing, which is increasing efficiency. This trend has been accelerated exponentially by the pandemic.

Credit at the point of sale is becoming more common. Similar to how UPI simplified and real-time payments, centralised data and API infrastructures like GSTIN and AA enabled similar merchant finance improvements. When financing is available at the time of the transaction, it is referred to as “embedded finance.”

Electronic payments, ecommerce listings, transactions, reviews, and other digital and verifiable data footprints are being generated, allowing for faster research and development.

Through just-in-time servicing and supply chain fulfilment, logistics innovation allows companies to pursue a direct-to-retailer approach.

What is Merchant BNPL, and how does it work?

This is a sort of short-term financing that small businesses can get from their suppliers when they acquire a product or service. The lender pays the supplier in advance, and the small business owner normally repays the loan in 15 to 60 days. The interest is usually borne by the seller, which could be a brand, distributor, aggregator platform, or digital B2B Marketplace.

Previously, this was known as dealer credit or distributor credit. The main difference is that, unlike dealer/distributor finance, BNPL uses a variety of data and cutting-edge technologies to provide real-time loans on digital travels. Furthermore, the average credit amount issued under BNPL is lower at first and rises as borrowers show good repayment behaviour.

Because the borrower (in this case, the small business owner) may only use the funds to buy from their supplier, it usually carries a smaller credit risk than funds that can be used for revenue generating purposes.

In-Purchase Financing/SME BNPL/Shop Now Paid Now are all terms used to describe Merchant BNPL.

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