Mondu and Billie, two companies that have earned both buzz and funding for their B2B BNPL products, aim to serve a large swath of merchants and marketplaces across industries. And that’s if the company is legit: Business identity theft is increasingly common as more transactions move online, and requires different fraud analysis tools than consumer identity theft. Foundational to the concept of “trade credit” is companies’ deep understanding of a business’ reputation in a sector to accurately underwrite risk. Legislators who authored New York’s law did not respond to requests for comment.īeyond regulatory compliance, the biggest challenge for these companies is underwriting the vast array of different types of businesses they aim to serve. And those new rules may sweep in some business pay-later plans that share a troublesome characteristic with merchant cash advances: opaque rates and terms that can make the real cost of payments difficult to calculate.Ī California law that goes into effect in December defines subject transactions as any “legally enforceable claim for payment held by a recipient for goods the recipient has supplied … but for which payment has not been made.” A spokesperson for the state’s financial regulatory agency declined to clarify if business-to-business payments would be subject to the law.

New York and California have passed laws requiring more disclosures on advances. Most lending regulations abroad don’t address business financing either.Įmerging state regulations on merchant cash advances, a non-lending financing option, may be more of a concern. “The innovation is in approaching this from different angles.”īusiness lending faces fewer regulatory hurdles than consumer financing: It’s exempt from most state usury laws in the U.S., and the Truth in Lending Act, which requires certain levels of transparency in lending, is geared towards consumer credit. It’s a “concept that already exists in marketplace and business lending,” said Julian Roeoes, head of Americas at Picus Capital, which has invested in three business-focused pay-later companies: Xepelin, OatFi and Billie. Some companies, like Xepelin, do both, arguing that coordinating the entire payment flow increases efficiency. Others buy invoices at a discount from sellers.

Some follow a business model very similar to traditional “buy now, pay later,” marketing their plans through merchants who see it as a way to boost sales. The companies typically make money off fees built into financing options, rather than explicit interest charges. In doing so, they shift default risk away from sellers, absorb operational burdens and improve credit decisioning with real-time transaction data. Pay-later businesses adapt trade credit, invoice factoring or a combination of both to offer more flexible financing options than the net-30, -60 or -90 day terms stamped on the typical invoice. Proponents say breaking up business payments over time promises more growth potential, a quicker path to profitability and less risk than catering to retail consumers. The average ticket size is significantly higher among businesses than consumers, allowing payments companies to command larger fees. Statista estimates that the global business payments market is $125 trillion, while the global consumer payments market is only $52 trillion. Who can blame them, in a tottering economy? But some investors are still bullish on pay-later - if the customers are other businesses.īusiness-to-business “buy now, pay later” startups are on the rise, and it’s clear why. The tumbling valuations of consumer-facing “buy now, pay later” companies in public and private markets suggest investors are losing confidence in the sector.

Invoice factoring near me