Currents in Credit for Digital Products
30 Sep 2021Consumer and B2B credit practices are changing, and the ‘consumerization’ of business credit is a problem, not a cure.
Companies that want to maximize revenue usually think about how to extend credit to customers. And for a long time this looked one way for consumer markets (credit cards), and another way for business markets (payment terms). This dichotomy is changing with noticeable impacts - especially for those who want to expand B2B subscription sales.
On the one hand individuals now have something that looks a lot like business payment terms. You can see this in buy-now-pay-later (BNPL) programs, essentially making it possible to pay in the future without the use of a backing credit card.
On the other hand we are seeing business purchases supported by corporate credit cards reimbursed to the employee according to the company’s expense policy. If your team, for example, uses Slack when the corporate standard is Microsoft Teams, maybe you’ve experienced this way of doing things.
The BNPL-supported consumer credit experience feels like a new feature that helps expand sales. The B2B credit card experience feels different - like a hack or a work-around. Why?
More effort is required when companies use employee credit card programs as an intermediary for procurement. Data about subscriptions, renewals, and about the productive usage of the underlying product are either entirely missing or spread out across teams and individuals. There are challenges in pulling the data together and making this kind of spend less opaque.
But there is an even bigger information problem introduced for the seller /maker when companies pay for a subscription to your product by way of credit card. It means that your product is off the radar, not part of strategic business decisions. Their Development, Finance and IT heads may not be aware that your product is already on site, already being used effectively. In such cases the corporate card program is essentially acting as an approved way for their teams to go rogue. That may be good for them, but it isn’t good for you. Yes, you get paid without much trouble. But it makes it harder for you to expand sales with the rest of the company.
Ultimately, organizations selling B2B subscriptions need to become a little more sophisticated about credit. Extending credit is not synonymous with getting paid. It means offering smart inducements to commit to your product. It also means being able to pinpoint your market niche - where this is both a demonstrated need and a willingness to pay for your product. And through this knowledge, you can take the right actions to grow sales. This is a big challenge today and one waiting for someone to fix.