Nearly two years since the first nationwide COVID-19 lockdown, the Canadian economy is finally starting to claw its way back to pre-pandemic levels. It’s been a slow and exhaustive process for many, but particularly demoralizing for businesses and the entrepreneurial spirit.
COVID-19 has transformed our perception of the economy, altered major elements of our daily lives, and forced us to reevaluate the so-called “traditional” way of doing things. Consumer behaviours were not immune to those changes. The exponential rise in e-commerce has reshaped spending habits, with consumers – often of a younger generation – demanding more flexibility without the pitfalls of plastic credit cards.
Buy now, pay later (BNPL) has answered to those changes. Its adoption has been massive in Canada, with the market expected to grow by 63.5 per cent in 2022. A 2021 pilot study by the Canadian government highlighted how BNPL options can be a critical component for consumer buying power while “[helping] certain consumers budget and smooth out expenditures, particularly during periods of economic hardship or uncertainty.”
BNPL products like Affirm, AfterPay and Klarna have enabled shoppers to spend without settling at a time when market fluctuations and inflation concerns fuel financial insecurities and threaten a strong economic revival. There’s no question that it’s proved itself as a valuable payment solution for industries of all kinds.
But the adoption and advantages of BNPL shouldn’t be – and isn’t – limited to the B2C model.
BNPL benefits mirrored in B2B
As BNPL fundamentally restructures consumer financing alternatives, the B2B world will undoubtedly see a similar transformation. B2B can take advantage of BNPL’s benefits, and then some. By extending credit to Canadian small businesses, harnessing automation, and accelerating the underwriting process, BNPL can boost both the Canadian fintech lending sector and the broader Canadian economy.
Tabit, the product that we launched through my company, Merchant Growth, is the embodiment of this for Canada. Being the first Canadian BNPL solution for B2B businesses offered at checkout, on a fully-automated basis, tabit gives small businesses the same advantages as big ones – helping them improve their cash flow and increase their purchasing power – and makes it easier for sellers to convert sales without taking on credit risk.
We know that interest in BNPL is growing among Canadian small business owners. Fifty-three per cent would consider a financing solution at checkout where payments are made over time, according to a new survey by tabit and Angus Reid. Thirty-four per cent say BNPL financing would make them more likely to make larger purchases for their business.
Small businesses are the backbone to the Canadian economy, and the post-pandemic recovery demands new ways for businesses to manage their finances and make payments. We’ve seen how BNPL can bolster business overseas – with B2B BNPL payment options proliferating in the U.S., the U.K., and Germany. Canada has lacked a unique credit option for a digitally savvy generation of B2B buyers, until now.
Millennials leading shift in BNPL adoption
Millennial business owners are leading the shift in sentiments around financing options like BNPL in Canada.
Our survey found that 44 per cent of young business owners would be more likely to make larger purchases for their business if an option like BNPL was offered at point-of-sale. Young business owners – like Millennial and Gen Z – are also twice as likely as those of older generations to “definitely” consider using this type of financing solution.
It’s clear the younger generation, who today make up a third of the total Canadian workforce, want the same business-to-consumer buying perks in the business-to-business landscape. To put it simply: young small business owners want increased buying power. Having grown up in a financial downturn, young generations are actively trying to avoid traditional debt when making financial decisions for their business. At Merchant Growth, we see huge potential in this space, and believe tabit is well-positioned to strengthen this generational shift.
The B2B payments landscape has changed dramatically over the past 20 years – even more acutely through the pandemic. As technology rapidly advances and the generation of business owners diversifies, so too must financial services. For Canadian businesses, the adoption of BNPL is the natural next step – freeing up business owners to focus on growing their business instead of managing cash requirements.
David Gens is the Founder & CEO of Merchant Growth and tabit.