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2022 has been a difficult year for the majority of the fintech firms, especially in the buy now pay later (BNPL) sector, around the world. The majority of the players, including Klarna, Afterpay, and Affirm, among others, have faced dramatic dropdown in their valuations. These firms have been also struggling to raise fresh capital from venture capital and private equity firms. While the consumer-focused BNPL segment is facing serious headwinds amid the current macroeconomic conditions, the B2B BNPL business model is gaining increasing traction among both fintech firms and venture capitalists.
Over the last few quarters, venture capital firms have shown increasing interest in the B2B BNPL space. In Europe, many B2B-focused BNPL players such as Playter, Hokodo, and Mondu, have raised capital from venture capitalists. With the B2B BNPL sector expected to drive the next growth phase for the BNPL industry, fintech firms are also launching the B2B BNPL product to further enhance their product portfolio. For instance,
The launch of the Flex B2B BNPL service further expands the total addressable market for Ramp in the B2B payments market. After achieving success with its bill pay feature, the service that allows businesses to pay their bills and manage everything in one place, the B2B financing solution is part of the firm's strategy to further accelerate its growth and market share. Notably, the implementation of the B2B BNPL product into its existing suite of payment products will make the service more valuable for corporates, thereby driving more adoption and loyalty, resulting in faster growth for the firm.
Notably, the bill pay feature for Ramp has resulted in massive user growth. Within the first six months of its launch, the firm reported US$1 billion in annualized bill pay volume. This feature has even exceeded the growth of its corporate card, which is one of the fastest growing in the United States. The launch of Flex will further assist the firm in driving the growth of its transaction value and volume, given the growing demand for the B2B BNPL product among corporates across different industries, such as e-commerce, manufacturing, and others.
The incorporation of the B2B BNPL product into its product offering is also expected to drive higher revenue for the firm. Notably, Ramp makes money through instant bill payments and interchange fees. Consequently, the longer the terms of financing, the higher will be the fees paid by its corporate clients. The fees paid by corporates range from 1% to 3% depending on the repayment period. Even if the repayment is done within 30 days and businesses do not use the corporate card, which means zero revenue for the firm, customers will be continuing to use the Ramp payments product, thereby creating more loyalty.
To get a bigger share of the global US$120 trillion B2B payments market, the firm also announced the launch of its cross-border payments feature.
While in the B2B BNPL space the firm is projected to face tough competition from players such as Kontempo, in the cross-border payments space, Ramp will be competing with players such as American Express, which launched a similar feature in August 2022. Notably, the firm raised US$750 million in March 2022, attaining a valuation of US$8.1 billion. Furthermore, Ramp also doubled its revenue run rate in the current macroeconomic conditions, where the majority of the fintech firms are struggling and facing serious headwinds from rising inflation and interest rates.
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