by Ben Dwyer You’re probably familiar with the “buy now, pay later” concept. A business allows a consumer to make a ‘purchase’ and take goods that they will pay for in installments over time.
Buy Now, Pay Later (BNPL) saw increased adoption in the ecommerce world when companies like Afterpay and Klarna came on the scene. These companies (and others) were convenient ways for businesses to offer Buy Now, Pay Later options with less work and risk for themselves. But is it worth using at your business?
In this article, I’ll go over what Buy Now, Pay Later entails, the costs, pros and cons, regulations, and more.
How does Buy Now, Pay Later work?
At the heart of it, BNPL simply means that a customer makes a purchase that they will pay for in an agreed-upon amount of installments over some future period of time. The amount and number of installments is up to the business and the consumer.
Technically, you could do it yourself by setting up a BNPL contract and terms with your customer, then requesting payment at the agreed-upon times or charging a saved card. However, most businesses that offer BNPL prefer to use a third-party. Companies like Afterpay and Klarna handle the installment / payment portion for the business. You sign up with one of those companies, and they will set up the “pay later” portion with your customer. The BNPL company will typically pay you the full amount of the customer’s purchase, minus a fee, at the time of purchase. Then they will take over the rest of the money collection. You won’t have any further involvement.
Some BNPL providers are moving more toward traditional credit, offering revolving credit lines or longer-term installment plans. This blurs the line between BNPL and credit cards but may appeal to consumers who want flexibility or are already comfortable with Buy Now, Pay Later.
Why is it popular?
Buy Now, Pay Later gained traction during the pandemic, when online shopping saw spikes due to the closure of brick-and-mortar businesses or the desire to avoid public places. BNPL offered consumers the ability to make purchases but divide the cost into installments. Usually, the installments were interest-free, making them more appealing than credit cards.
For business owners, BNPL promised higher average order values, reduced cart abandonment, and increased conversions, with little or no upfront cost. The logic was that if customers can spread out payments, they’re more likely to buy now and, often, buy more.
BNPL Post-Pandemic
Buy Now, Pay Later is still available, including from major players like Affirm, and indications are that consumers who use it both spend more and choose to purchase more often. Harvard Business Review notes that BNPL has typically led to substantial increases in spending, as much as 10% more than before the introduction of BNPL. Additionally, customers who utilize BNPL are 17-26% more likely to make a purchase. Customers that face financial constraints or lack access to other means of credit are especially likely to use BNPL.
Buy Now, Pay Later Regulations
As of 2025, BNPL regulations are a moving target. The Consumer Financial Protection Bureau (CFPB) announced in 2024 that it intended to implement new rules requiring BNPL providers to adhere to many of the same standards as credit card companies. That included clearer disclosures, standardized dispute resolution processes similar to credit card disputes, and monthly statements.
However, in March 2025, the CFPB announced it was rescinding the rule. While it is not currently in effect, the CFPB does monitor the BNPL industry and consumer sentiment, and could choose to impose new rules in the future.
Pros of BNPL
For business owners, giving customers the most possible choice in how they pay can only help sales. Offering BNPL can be a competitive advantage by enticing customers who prefer to use BNPL and seek it out.
Additionally, as noted above, customers that use Buy Now, Pay later typically spend more and make purchases that they may not otherwise have made. Both of these are good for your bottom line.
Cons of BNPL
Buy Now, Pay Later does have its drawbacks. Firstly, it’s not free to use. Even if you choose a do-it-yourself approach, you’ll spend more time on the administrative aspects of the sale than you would with a one-time direct purchase. Additionally, in that situation, you’re taking on the risk of the customer not paying the full amount over time. If you choose a BNPL company to implement the option for you instead, you will minimize the administrative work and the risk, but you’ll pay for the service. You’ll be eating into that extra money from the higher sales of BNPL.
From a psychological standpoint, your customer will also associate your business with their BNPL purchase. If they have a bad experience with the BNPL collector, your business may get a negative reputation with that customer by association.
Buy Now, Pay Later Companies
In addition to BNPL companies like Afterpay, Affirm, and Klarna, Visa and Mastercard have launched their own BNPL frameworks. That allows credit card issuing banks to offer installment plans with Visa and Mastercard transactions, without the need for a third-party BNPL provider.
If you’re interested in offering BNPL at your business, be sure to check out both traditional BNPL companies and the BNPL options from Visa and Mastercard. Here are some handy links:
- CardFellow’s Klarna review
- CardFellow’s Affirm review
- Mastercard’s BNPL platform
- Visa’s BNPL platform
Costs to Implement BNPL
As with most things in credit card processing, the cost to implement BNPL varies. Your industry, volume, payment acceptance method, and more can all affect the total costs. BNPL companies often don’t charge setup or monthly fees, but will charge per-transaction. Amounts can vary greatly, but are often in the range of 30 cents per transaction. Depending on your terms, you may also pay a percentage fee. However, you won’t be paying credit card processing fees on the transaction. (That’s the benefit of the “pay later.”)
If you’re considering implementing BNPL, it’s worth comparing multiple platforms. You can also contact your credit card processing company to see if they offer a BNPL solution or can implement Visa and Mastercard’s installment BNPL options.
Is it worth offering BNPL?
At the end of the day, you’ll need to determine this for your own business. There is no right answer. BNPL could be a fit if you have high average transactions, as paying in installments can help remove customer hesitance to make the purchase. On the other hand, if your average transactions are smaller, customers may not see it as worthwhile to use BNPL. Additionally, if you already offer other types of in-store financing or credit, offering BNPL might be redundant.
If you do offer BNPL, be sure to monitor its usefulness. Look for increased transaction amounts and an increase in the number of transactions. If you’re not seeing a benefit, you can consider dropping it from your payment options.
Do you offer Buy Now, Pay Later at your business? Would you recommend it? Let us know in the comments!
