What Is Buy Now, Pay Later? Is It Right for Your Business?

Buy now, pay later is becoming increasingly popular, but is it right for your business? We’ll walk you through what it is and the pros and cons of using it.

While the idea of paying for larger purchases in installments has been around for decades, newer fintech companies have taken the idea to a whole new level with buy now, pay later. BNPL, for short, allows customers to easily break purchases into smaller installments, which can be beneficial for you and your customers. 

As a business owner, you can choose whether to work with BNPL providers to add convenience for your customers. However, BNPL also comes with steep fees, so it’s worth considering the pros and cons before signing up. We’ll break down exactly how it works and the benefits you might gain by providing BNPL. 


What Is Buy Now, Pay Later?

BNPL is a short-term financing system for consumers that allows them to buy a product and pay for it over a series of installments. It’s similar to credit cards in that the money is paid to you, as the merchant, upfront, but the customer pays the provider back in a series of payments spaced over a couple of months. 

The difference is that BNPL doesn't require customers to go through a lengthy credit approval process and there are no-interest or low-interest options that are much better than credit card interest rates. 

To be approved for BNPL, a consumer only needs a soft credit pull, which doesn’t affect their credit score, unlike credit card applications. This makes it an attractive option for those that can’t get approved for credit cards or don’t want to risk impacting their credit score.

It’s a convenient option for customers that may want financing without needing a credit card. Plus, because most BNPL have apps or user-friendly online platforms, these services often appeal to younger consumers who may have less disposable income to afford major purchases.

There are many BNPL providers on the market, with new ones popping up frequently. Companies like Klarna and Affirm have been on the market for over a decade, but other companies like Zip and Afterpay are also extremely popular around the world. Even big names like PayPal, Apple Pay, and Amazon are rolling out specific BNPL services for their customers. 

Some of these companies allow for BNPL to be used online or in-store, whereas others are for online-only businesses. As a retailer, this means you can offer your customers more choices. 

How Does Buy Now, Pay Later Work?

Unlike credit cards which are issued by a bank and are used online or at POS systems by the customer, BNPL is chosen at checkout. Sometimes known as a POS loan, customers can choose this as a payment option when making a purchase. 

The process looks like this:

  1. You choose which BNPL vendors you want to work with. These can then be added as payment method options on your POS or online checkout page. 
  2. A customer going through the purchasing process can select the BNPL vendor at checkout, as one of the payment method options. 
  3. After the customer enters some personal details, the BNPL vendor can check their history and approve the release of funds to you. 
  4. You will be billed for all BNPL purchases, usually between 2-8% of the purchase price. 
  5. The customer deals directly with the BNPL vendor for repayment, usually in four installments across several months. 

As with credit cards or other payment methods, you still get the full purchase amount upfront and only the customer has to deal with repayment after the transaction. This means that even if they don’t pay the vendor back over time, you won’t be at a loss. 

Additionally, like credit card companies, you will be charged a percentage of every BNPL purchase, between 2-8%, depending on the specific provider. This can be significantly higher than credit card processing fees. 

The Pros and Cons of Buy Now, Pay Later

Overall, there are many benefits for working with BNPL for your business, but there are also some drawbacks to consider before adding it to your payment options. 


  • Increases average order value: Customers use BNPL because it allows them to make larger purchases without the financial strain of paying upfront. As such, customers may be willing to spend more when they have BNPL as an option. 
  • Improves customer experience: BNPL offers customers with more convenience which in turn helps increase overall satisfaction. This can help keep customers coming back time and time again. 
  • Helps you stay competitive: Since more businesses (especially big businesses) are adding BNPL into their POS, it's important to remain a competitive alternative by offering convenience and ease. 
  • Drives online sales: When you offer BNPL on your website, it can help boost sales as customers worry less about the purchase price and are willing to spend more. 
  • Appeals to more customers: BNPL is a convenient and interest-free alternative to credit cards, especially for younger, tech-focused generations.


  • High merchant fees: The fees of BNPL from the total purchase amount range from 2-8%, depending on the provider, which can be higher than credit cards.
  • Lack of transparency: Not all BNPL providers are as open and upfront with fees and terms of service, so it’s important you do your research before opting for one.
  • Risk of fraud and chargebacks: Similar to credit cards, there is always a risk of fraud and chargebacks for BNPL transactions, which can cause undue stress, 
  • Integration issues: Not all BNPL providers work with every POS system or website builder, which means you might be tied in with a specific provider, whether it’s the best option or not. 
  • Potential regulations to consider: As a fast growing industry, there are many proposed regulations from governments around the world that may affect BNPL services at your business. 

What’s the Best Way for a Small Business to Accept Payments?

BNPL is just one of the many ways customers pay for goods and services. It’s a convenient option for many, but others may choose to stick with credit cards, debit cards, or bank transfers as reliable payment options. 

When you use Pay.com as your payment service provider, you can choose to accept a wide variety of payment methods from your customers, from credit cards to digital wallets such as Apple Pay. Offering multiple choices means your shop appeals to more customers, making it convenient and easy for them to pay you. 

Signing up for a Pay.com account is an easy and straightforward process. After a simple onboarding process, you’ll gain access to the user-friendly Pay Dashboard, an online interface that allows you to track and manage all payments, associated fees, and any disputes. Pay.com takes the hassle out of payment processing. 

The Bottom Line: Is BNPL Right for Your Business?

Offering your customers BNPL as a payment option can be a great way to reach a wider customer base and stay competitive in the growing market. However, BNPL does charge hefty fees, often on par with or higher than credit card processing fees. 

Because of this, it’s important to weigh the fees against the potential benefits to decide if it’s right for you. BNPL is a great way for customers to split large purchases and they are often willing to buy more or higher quality if they know financing is a viable option. Generally, this can help offset the fees associated with BNPL vendors.

However, BNPL is just one of the many payment methods customers are after. Pay.com lets you accept a wide range of payment methods including credit cards, digital wallets, ACH transfers, and more. With a fast and easy onboarding process, you can start accepting payments through your website in no time. 

Click here to create your Pay.com account now!


Why should a business accept multiple payment methods?

Accepting multiple payment methods is a great way to appeal to a wide range of customers, as different people often have particular payment preferences. Convenience plays into customer experience, which can keep customers loyal to your business. Pay.com makes it easy to choose from a wide selection of payment methods to accept on your site. 

Click here to get started with Pay.com now!

How does buy now, pay later work for merchants?

As a merchant, you can decide to work with BNPL providers as an additional payment option for customers. Customers can choose BNPL at checkout and the provider finances the purchase for them, so you get the money upfront, while the customer pays the provider back in installments. However, it will cost you a fee of between 2-8%.

Why do customers like buy now, pay later?

Customers like buy now, pay later because it allows for short term financing without the need for credit cards. Generally, the interest fees are lower than credit card companies (some don’t charge interest at all) and it allows a customer to break up a larger purchase into smaller, more manageable installments.

Meet the author
Ashley Hague
Ashley Hague is a B2B writer based in New Zealand. Specializing in fintech, SaaS, and sustainability in business, she helps businesses achieve their goals. When not working, she can be found rock climbing or delving into a historical biography.
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