Problem Definition
NovaPay is a consumer Buy Now Pay Later (BNPL) fintech with $320M in annual revenue and 8 million active users. The company has been a strong performer in consumer installment payments, but growth has decelerated sharply — from 80% year-over-year three years ago to just 12% in the most recent fiscal year. The consumer BNPL market in NovaPay's core geographies is approaching saturation, with major competitors and traditional banks launching competing products.
The CEO has identified B2B payments as the next growth frontier. Specifically, NovaPay is exploring the B2B trade credit market — offering net-30, net-60, and net-90 payment terms to small and medium businesses (SMBs) purchasing from suppliers. The global B2B trade credit market is valued at $3.2 trillion but remains highly fragmented, with banks and manual invoicing still dominating. Digital penetration is below 20% across most segments.
NovaPay has a $150M budget allocated for this initiative and is evaluating three entry modes: building a B2B product in-house, acquiring an existing trade credit startup, or partnering with an established B2B payments platform. The CEO has asked you: should NovaPay enter the B2B trade credit market, and if so, which entry mode should it pursue?
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- NovaPay's consumer BNPL operates in 6 countries with a proprietary credit-scoring algorithm trained on 200M+ transactions
- The company has $180M cash on hand and is profitable, with 14% net margins on its consumer business
- NovaPay's existing tech stack is built for high-volume, low-value consumer transactions
- The B2B sales cycle is 3-6 months vs. instant consumer onboarding
- Three potential acquisition targets and one partnership candidate have been identified (see Exhibit 2)
- NovaPay's board has set a 3-year timeline to reach profitability on any new business line
Question 1Structuring
Prompt: How would you structure your analysis of whether NovaPay should enter B2B trade credit and through which entry mode?
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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-
Market Opportunity Assessment
- Total addressable market by segment and digital penetration
- Growth trajectory and competitive dynamics
- Regulatory landscape for B2B lending and credit
-
Capability Transferability
- Credit scoring algorithm: does consumer data relevance extend to B2B underwriting?
- Technology stack: can it handle longer payment cycles and larger transactions?
- Sales motion: self-serve consumer vs. relationship-driven B2B sales
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Unit Economics and Capital Requirements
- Revenue per transaction vs. capital deployed per transaction
- Default risk comparison (consumer vs. B2B)
- Working capital requirements and funding sources
- Time to breakeven by entry mode
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Entry Mode Evaluation
- Build: timeline, cost, risk of execution delay
- Acquire: target quality, integration complexity, price vs. budget
- Partner: speed to market, margin sharing, strategic control
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Let the candidate think for 60-90 seconds. Push back if they default to a generic market entry framework without adapting it to NovaPay's specific situation — a fintech pivoting from consumer to B2B credit has unique considerations around capital requirements, credit risk, and technology transferability.
Good (3): Candidate identifies 3-4 logical buckets — e.g., market attractiveness, NovaPay's capabilities, entry mode comparison, financial feasibility. Structure is logical but largely generic. May mention "synergies" without specifying what transfers from consumer BNPL to B2B trade credit.
Strong (4): Candidate customizes the framework to NovaPay's context. Identifies that transferability of the credit-scoring algorithm is a key differentiator. Separates the "should we enter" question from the "how should we enter" question. Recognizes that B2B credit has fundamentally different cash flow dynamics than consumer BNPL.
Excellent (5): Candidate's structure surfaces the working capital question early. Frames the problem around capital efficiency — not just revenue opportunity — by noting that B2B trade credit is a balance-sheet-intensive business. Identifies that NovaPay's consumer infrastructure (high-volume, low-value, fast-cycle) may be architecturally incompatible with B2B (low-volume, high-value, slow-cycle). Asks upfront whether NovaPay has access to warehouse lending or securitization facilities.
Question 2Numeracy
Prompt: NovaPay is modeling a scenario where it enters B2B trade credit and reaches $400M in annual GMV by Year 3. Using the data below, calculate the annual net profit (or loss) and the working capital required to support that volume. Is this viable within the $150M budget?
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
| Input | Value |
|---|---|
| Year 3 B2B GMV | $400M |
| Take rate (fee charged to SMBs) | 4% of GMV |
| Default rate (unrecoverable) | 2% of GMV |
| Average collection period | 180 days |
| Annual cost of capital | 10% |
| B2B operating expenses (Year 3) | $4M |
Note: NovaPay's superior consumer underwriting is projected to reduce the B2B default rate from the 5.4% industry average to 2%.
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Step-by-Step Solution
Step 1: Revenue
| Component | Calculation | Result |
|---|---|---|
| Annual GMV | Given | $400M |
| Take rate | 4% | — |
| Revenue | $400M x 4% | $16M |
Step 2: Default Losses
| Component | Calculation | Result |
|---|---|---|
| Annual GMV | Given | $400M |
| Default rate | 2% | — |
| Default losses | $400M x 2% | $8M |
Step 3: Working Capital Required
NovaPay advances funds to suppliers and collects from SMBs over 180 days. At any given time, NovaPay has half a year's worth of GMV outstanding.
| Component | Calculation | Result |
|---|---|---|
| Annual GMV | Given | $400M |
| Collection period | 180 days (half a year) | — |
| Capital outstanding | $400M x (180 / 360) | $200M |
Step 4: Cost of Capital
| Component | Calculation | Result |
|---|---|---|
| Capital outstanding | From Step 3 | $200M |
| Cost of capital | 10% | — |
| Annual capital cost | $200M x 10% | $20M |
Step 5: Net Profit (Loss)
| Item | Amount |
|---|---|
| Revenue | +$16M |
| Default losses | -$8M |
| Cost of capital | -$20M |
| Operating expenses | -$4M |
| Net profit (loss) | ($16M) |
Step 6: Budget Feasibility
| Item | Amount |
|---|---|
| Total budget | $150M |
| Working capital needed | $200M |
| Shortfall | ($50M) |
Even before acquisition or build costs, NovaPay cannot fund the working capital from its $150M budget. The $200M requirement exceeds the entire allocated budget by $50M.
Key Insight: The B2B trade credit business generates $16M in revenue but requires $200M in deployed capital — a negative 8% return on capital. The cost of capital alone ($20M) exceeds total revenue ($16M). This is a balance-sheet-intensive business fundamentally different from NovaPay's asset-light consumer model.
What the interviewer is looking forShow guidanceHide guidance
Give the candidate all inputs at once. The critical test is whether they recognize that working capital must be funded and carries a cost. Candidates who compute "Revenue minus Defaults minus OpEx = profit" without accounting for capital cost will reach a dangerously wrong conclusion.
Watch for the trap: A candidate who stops at $16M - $8M - $4M = $4M profit has missed the entire point. Prompt: "What capital would NovaPay need to have deployed at any given time to support $400M in annual GMV with 180-day collection terms?"
Question 3Judgement & Insights
Prompt: Review Exhibits 1 through 3. Given the unit economics challenge you identified, is there a viable path for NovaPay into B2B trade credit? What segment should it target and why?
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
Exhibit 1Unit Economics — Consumer BNPL vs. B2B Trade Credit
| Metric | Consumer BNPL (NovaPay) | B2B Trade Credit (Industry Avg) |
|---|---|---|
| Avg Transaction Value | $200 | $800 |
| Take Rate | 5.0% | 4.0% |
| Revenue per Transaction | $10.00 | $32.00 |
| Default Rate (% of GMV) | 1.8% | 5.4% |
| Avg Days to Collection | 42 | 210 |
| Capital Turns per Year | 8.7x | 1.7x |
| Revenue per $1 Deployed | $0.43 | $0.07 |
| Customer Acquisition Cost | $30 | $350 |
| Annual Transactions per Customer | 5 | 12 |
Source: NovaPay case file
Exhibit 2Acquisition and Partnership Candidates
| Company | B2B GMV ($M) | SMB Clients | Default Rate | Tech Platform | Est. Price ($M) | Notes |
|---|---|---|---|---|---|---|
| TradeFlow | 420 | 3,200 | 4.8% | Modern API-first | 180 | Strong product, exceeds budget |
| CreditBridge | 280 | 5,800 | 7.2% | Legacy monolith | 85 | Most clients, worst defaults |
| PayNet360 | 150 | 1,400 | 3.1% | Modern API-first | 110 | Best defaults, smallest scale |
| SupplyFin | 680 | 8,500 | 6.5% | Hybrid | Partnership only | Largest volume, open to revenue share |
Source: NovaPay case file
Exhibit 3B2B Trade Credit Market by Segment
| Segment | Market Size ($B) | Annual Growth | Avg Default Rate | Digital Penetration | Competitive Intensity |
|---|---|---|---|---|---|
| Manufacturing | 1,200 | 4% | 4.2% | 12% | High |
| Wholesale / Distribution | 850 | 6% | 5.8% | 18% | Medium |
| Professional Services | 480 | 11% | 2.1% | 35% | Low |
| Construction | 670 | 3% | 8.9% | 8% | Low |
Source: NovaPay case file
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The segment analysis reveals Professional Services as the strongest entry point:
- Lowest default rate (2.1% vs. 5.4% industry average) — directly addresses the unit economics problem
- Highest digital penetration (35%) — NovaPay's technology-first approach resonates with these buyers
- Fastest growth (11%) — captures a rising market
- Low competitive intensity — room to establish position before incumbents respond
However, even with Professional Services, NovaPay should not deploy its own capital. The working capital trap makes balance-sheet lending unviable at NovaPay's current scale. Instead, NovaPay should partner with SupplyFin and monetize its credit-scoring IP through a technology licensing or revenue-share model.
CreditBridge appears cheap at $85M but carries a 7.2% default rate and a legacy monolith requiring $30-50M in modernization — a value trap. TradeFlow at $180M exceeds the budget. PayNet360 at $110M is affordable with strong 3.1% defaults but has limited scale at only 1,400 clients.
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This question tests whether the candidate can move beyond "the numbers don't work" to find a conditional path forward. Push the candidate to reconcile the negative unit economics with the strategic rationale.
Good (3): Candidate identifies Professional Services as the best segment based on lowest default rate (2.1%) and highest digital penetration (35%). Recognizes that lower defaults improve economics. May suggest a partnership model to reduce capital intensity.
Strong (4): Candidate connects Exhibit 1 and Exhibit 3 — notes that Professional Services likely has shorter effective collection periods than the 210-day industry average, which reduces working capital needs. Identifies that the SupplyFin partnership avoids the capital problem because NovaPay would not need to fund the float itself. Flags that CreditBridge's low price ($85M) is a trap given its 7.2% default rate and legacy technology.
Excellent (5): Candidate builds a "So What?" cascade:
- Level 1 (Surface): Professional Services has the best risk profile — 2.1% defaults, 35% digital penetration, 11% growth
- Level 2 (Implication): The real play is not lending NovaPay's own capital. NovaPay should leverage its consumer credit-scoring IP to underwrite for others rather than deploying its own balance sheet
- Level 3 (Actionable): Partner with SupplyFin ($680M GMV, 8,500 clients) to provide underwriting-as-a-service. NovaPay supplies the credit algorithm; SupplyFin supplies the capital and client base. This is asset-light, plays to NovaPay's core strength, and sidesteps the working capital trap entirely
Question 4Synthesis
Prompt: The CEO has 5 minutes before a board meeting. What is your recommendation?
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
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"NovaPay should enter B2B trade credit — but as a technology platform, not as a lender.
The insight: B2B trade credit is a $3.2 trillion market with below-20% digital penetration, but it is a balance-sheet-intensive business. Lending our own capital against 180-day payment terms would require $200M in working capital to support $400M in GMV — exceeding our $150M budget and generating a $16M annual loss.
The recommendation: Partner with SupplyFin. They process $680M in GMV across 8,500 SMB clients but lack sophisticated underwriting. We bring our credit-scoring algorithm trained on 200M+ consumer transactions and offer underwriting-as-a-service. We earn a revenue share without deploying our own capital.
Target segment: Professional Services first — 2.1% default rates, 35% digital penetration, 11% growth, and low competition. Expand into Wholesale and Distribution once the model is proven.
Key risks and mitigations:
- Our consumer credit model may not transfer directly to B2B — mitigation: run a 6-month pilot on SupplyFin's existing Professional Services portfolio before scaling
- SupplyFin could build its own underwriting capability — mitigation: negotiate a 3-year exclusivity clause in the partnership agreement
Next step: Engage SupplyFin for a 90-day pilot using $5M from the $150M budget. Reserve the remaining $145M for a potential PayNet360 acquisition ($110M) if the pilot validates the model and we want a proprietary client base."
Contributed by CaseDrill practice community
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Good (3): Clear recommendation with supporting rationale. States the entry mode and segment. Mentions the working capital challenge as a reason for the chosen approach.
Strong (4): Structured recommendation covering what to do, why, and key risks. Quantifies the value at stake. Identifies 2-3 implementation priorities and a timeline.
Excellent (5): Delivers a crisp recommendation that reframes the opportunity. Does not just say "enter" or "don't enter" — specifies the business model shift required (platform, not lender). Addresses the board's likely concerns around timeline, capital, and risk. Includes a concrete next step with a dollar figure attached.