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London-based working capital fintech Muse Finance has launched a buy now, pay later (BNPL) solution that will allow UK SMEs to source financing directly through their Xero invoicing system.

Through the integration, announced this week, SME merchants active on the Xero marketplace will be able to obtain immediate payment while their customers can access longer terms of up to 90 days.

The BNPL product is supported by credit insurer Allianz Trade, which is providing cover via an application programming interface (API)-based solution that draws on its database of over 80 million corporates to run credit checks.

To access the solution, sellers active on the Xero marketplace will have the option to register their interest in using it.

“Once they do that, when they send out invoices through Xero, the client or the buyer will see the option to pay for Muse. With this option, they can pay instantly or through four instalments,” says Muse’s CEO and founder, Ann Marie Juliano.

“Xero has over 5 million users in the UK alone, and average turnover is between £1mn and £5mn for these companies. That is the sweet spot we are looking at with this product.”

While the integration will initially be aimed at smaller-sized UK buyers and suppliers, Muse Finance is eyeing expansion into other markets later in the year, Juliano tells GTR.

The solution is backed by a two-layered credit risk assessment approach that takes a matter of seconds.

Muse will initially conduct checks on buyers via its own proprietary risk approach, which assesses over 10 billion data points such as financial performance, credit quality and metrics that might indicate fraud.

Credit insurer Allianz Trade will run additional checks and ultimately cover payments worth up to £12,000.

“Supporting the rapidly growing B2B e-commerce space has been an integral part of Allianz Trade’s strategy for a number of years. The ways companies trade are changing and BNPL is an increasingly popular way to manage business expenses,” says François Burtin, global head of e-commerce at Allianz Trade.

BNPL has long been popular in the consumer space through companies such as Klarna and Afterpay, but increasingly, trade finance banks and credit insurers are seeking similar success in the B2B space.

In 2022, Allianz Trade agreed to insure e-commerce platform Two’s BNPL solution, which ensures suppliers are paid immediately while granting longer payment terms to business buyers conducting trade both domestically and internationally.

The following year, Allianz Trade, Two and Santander announced a tie-up, as part of which the global bank is financing upfront payments to sellers and offering credit terms to buyers.

In April 2023, Citi made an undisclosed investment in European fintech Hokodo, a provider of BNPL and credit solutions in the B2B segment which is active on over 30 digital marketplaces and wholesalers. The fintech’s solutions are backed by insurance from Lloyd’s of London.

Muse initially launched an invoice finance product targeted at UK-based SMEs in 2019, and later rolled out a white-label supplier finance product that enables FX brokers to offer finance to their clients.