Obtaining financial gain from the acquisition of unpaid invoices without proper security measures in place
Unsecured invoice payment is gaining traction among businesses, offering a simple and trustworthy payment method that can significantly improve cash flow and operational agility. This payment method, made possible by solutions like CrefoPay by lynck, is particularly attractive for cost-conscious and experienced businesses looking to optimize their margins.
Developed in collaboration with Creditreform, CrefoPay enables seamless online payment processing, supporting merchants in managing their risk. Creditreform, Germany's leading provider of business information, marketing data, and solutions for claims management, has over 127 independent business locations and employs more than 3,200 people, serving over 141,000 member companies in Germany. The company also has a significant European presence with almost 4,000 employees, 162 business locations, around 162,000 member companies, and an international business network.
Benefits of Unsecured Invoice Payment
Implementing unsecured invoice payment for businesses can provide faster access to cash flow without the need for collateral. This financing method is suitable for newer businesses that lack physical assets but have good creditworthiness. Additionally, improved working capital management allows for better operational control and planning.
Risks to Consider
While unsecured invoice payment offers numerous benefits, it carries higher risks and costs. These risks include higher interest rates and fees, lower credit limits, potential reliance on invoice financing, client non-payment risk, credit risk and disputes, and the possibility of cycles of borrowing and debt accumulation.
Best Practices for Implementation
To mitigate these risks, it's crucial to perform thorough credit checks, define clear contractual agreements, maintain ongoing monitoring, avoid over-reliance on invoice payment financing, maintain accurate invoicing, and consider non-recourse options if affordable.
Customer Preference and Conversion Rates
Over 40 percent of German consumers prefer to pay on invoice in e-commerce. This trend suggests that unsecured invoice payment can lead to a higher conversion rate by making the purchasing process more attractive and reducing potential cart abandonment.
Moreover, unsecured invoice payment allows businesses to offer invoice payment without significant financial burdens and with full cost control. This can result in cost savings as there are no fees for insurance or external providers.
In summary, unsecured invoice payment can improve liquidity and operational agility, especially for asset-light or growing businesses. However, it must be implemented with strong risk controls, diligent credit management, and clear client agreements to avoid cost and credit pitfalls.
The team at Payment & Banking, an independent economic hub that reports, researches, and analyzes the most important topics around payment, banking, fintech, crypto, and digital assets, is a diverse team of founders, investors, consultants, and editors with a mission to provide deeper insights and actively shape the industry. They have partnered with Lynck Solution GmbH, a leading technology company specializing in digital payment processing for e-commerce and point-of-sale transactions, to develop tailored solutions that enable merchants to process payments securely and efficiently.
- The collaboration between Creditreform and Lynck Solution GmbH, a fintech company specializing in technology, has led to the development of CrefoPay, a solution that enables seamless online payment processing for businesses, promoting operational control and planning due to improved cash flow.
- In the fintech landscape, unsecured invoice payment is not only preferred by over 40 percent of German consumers but also offers business advantages, such as cost savings due to no fees for insurance or external providers, when implemented with prudent risk management practices.
