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A Guide to Buy Now, Pay Later (BNPL) for Merchants

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What You Need to Know

  • Buy now, pay later (BNPL) allows consumers to receive a product first and pay for it in installments, often without interest.
  • Merchants can offer BNPL as a payment option to their customers by using third-party BNPL service providers, who would be in charge of collecting the installments for them.
  • BNPL can improve the sales, performance, and impression of a store. It has also exploded in popularity over the pandemic.
  • However, because the market lacks regulations and constraints, BNPL services may attract consumers in financial difficulties and may exploit its users by not being clear about the consequences of their payment choice.
  • If you decide to offer BNPL, use Shypyard to integrate your accounting system with your e-commerce platform, so as to stay on top of any new influx in sales and to track your BNPL transaction fees.
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The payment option of buy now, pay later—sometimes shortened to BNPL—has exploded in popularity over the COVID-19 pandemic. It has become extremely popular with Gen Z and millennials, especially those with tighter finances. Even the 40-and-over population is starting to get in on the action. More and more merchants are also providing this option, even for products that are less than $100.

However, for many other e-commerce merchants, adopting BNPL may sound like a daunting and uncertain choice. For merchants who are hesitant yet interested in this payment service, this guide will walk you through the details of BNPL, how you can adopt it, and its benefits as well as problems.

A Guide to Buy Now, Pay Later (BNPL) for Merchants - Shypyard

What is Buy Now, Pay Later (BNPL)?

As its name suggests, BNPL allows consumers to buy and receive their products but delay their payment, typically without interest. It allows people to pay in installments, usually four in total. However, different BNPL payment plans may have different numbers of installments and may vary in whether they do credit checks, implement late fees, and demand interest. BNPL services assist customers who cannot afford a large purchase all at once. It is an especially popular payment method during the holiday season.

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How to Offer BNPL to Customers

Like with payment processors, most merchants use third-party providers to offer BNPL as a payment option to their customers. Some of the most popular BNPL service providers are Afterpay, Affirm, Klarna, Sezzle, and Zip.

A BNPL service provider usually sends a merchant the full payment for a customer's purchase within a few business days, and the consumer pays the provider back over a span of time through the installments. The merchant is charged a per-transaction fee — in addition to any monthly fees — for the service. This means that the merchant does not need to worry about managing the payment process themself, unless they would like to set up their own BNPL plans without the use of third parties.

Although it may vary, the flow of a buy now, pay later payment process should resemble this:

  • An online shopper goes to a store's checkout with their product(s) that is/are eligible for BNPL.
  • A quick eligibility check occurs, often in the form of a surface inspection of the shopper’s credit history, and the BNPL provider either approves or rejects the customer.
  • If the customer’s request is approved, they will pay a downpayment.
  • Sometimes, they are able to choose beforehand the number of installments to pay in total.
  • The merchant receives the payout in full, minus the transaction fees. The shopper’s purchase is delivered to them.
  • The shopper pays the BNPL service provider back in installments

The fee structure for each transaction a BNPL service provider handles is generally 2-8% of the payment processed, in addition to a small fixed amount. However, even this approximate range can vary based on the country and products of a business. BNPL providers charge more than card payment providers; however, being able to provide buy now, pay later as an option to consumers has many benefits.

The Benefits of BNPL for Merchants

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As you can likely guess, there are many benefits to offering BNPL as a payment option in your online store.

Incentivized by the fact that they don’t have to pay in full immediately, customers may spend more money, either on more high-end products or simply on more products overall. In other words, BNPL increases the average cart size and average order value of an e-commerce store.

With BNPL, Merchants can also attract more customers that otherwise would not consider buying their products. The delayed payment process can also lower the purchase hesitations of customers and reduce the cart abandonment rate.

Moreover, offering BNPL often improves a user's experience in the payment process and their impression of the brand. This may hold true even if the customer does not choose to pay with BNPL.

To summarize, offering BNPL can increase the sales and performance of an e-commerce business. Therefore, when considering to implement BNPL, it pays to also set up and/or improve your accounting system to help you stay on top of inventory, customers, transactions, etc. This is where Shypyard comes in. Shypyard provides seamless integrations to connect your accounting software and e-commerce platform — boasting automated inventory updates, sales order documentation, multi-channel support, error handling, etc. Shypyard can also help you track your store's BNPL transactions separately, to gain a better understanding of how much exactly you pay your BNPL provider each month. For example, click on this link to learn about how you can send fees applied to your store's orders to an accounting system to be listed as expenses.

The Problems of BNPL

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Almost as equally obvious as its benefits, buy now, pay later services also have a lot of potential problems.

Most notably, BNPL services do not always do affordability checks. As a result, the payment option may attract people who are in financial difficulties and whose decision to purchase a product, even in installments, would strain their financial situation. Some may not have the capacity to pay the installments at all, which would be made worse in situations where the BNPL provider charges interest and late fees. BNPL may also encourage unsustainable spending habits and a reliance on loans in certain people.

In addition, BNPL services often do not provide customers with enough time or protection to reflect on the consequences of their choice. Many people sign up for the option and agree to its terms without ever reading or understanding the actual agreement. In more extreme cases, they could choose to buy now and pay later without realizing what they have done and what they should do over the next few weeks.

Finally, BNPL as a service lacks regulations. Consequently, there may be opportunities for providers to take advantage of consumers. As this area matures, scams and fraud attacks may also start appearing, which both merchants and customers must be alert for.


Whereas installment payments used to merely be a payment option at the checkout, BNPL is now increasingly influencing the mindset and habits of consumers earlier in the shopping journey. As a result, it may be a good idea for e-commerce stores who offer BNPL to inform customers of the availability of this service early in their purchasing journey.

Currently, merchants are relatively well protected from the risks and problems of BNPL, standing to improve their store’s performance by providing the payment option. However, they should remain alert for any new trends in BNPL services, as the market continues to mature.

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