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How does Buy Now, Pay Later (BNPL) work for businesses?

By on March 4, 2022 0

To attract a wider customer base, many retail business owners with POS systems are adopting the Buy Now, Pay Later (BNPL) payment model. The BNPL method has evolved largely due to the changes caused by COVID-19 and the growth we are seeing in online shopping.

So what exactly is BNPL for business and how can it help accelerate your profits? We research the answers to this question to help you get started and attract new types of customers.

What is buy now pay later? Definition of BNPL

According to the latest data from the retailer giant Worldpay, as noted by, “BNPL is currently the fastest growing online payment method – it accounts for over 5% of all e-commerce spending. This tripled the BNPL market in 2020 and 5 million people have been using BNPL since the start of the pandemic. ”

This payment method allows consumers to spread the cost of paying for their goods and services, usually over a six-week period in four equal installments. The refund period and the amount of the payment installment may differ.

At first glance, it looks a lot like layaway or just using a credit card. So what’s the difference? Well, one big difference is that many BNPL options are interest free. Another noteworthy point is that the seller requires the consumer to choose an upfront payment option, for example six payments on a specific day, fixed in advance at the time of purchase.

As a retail owner or manager, you simply cannot ignore this change in payment method as it offers financial integration to those who need help spreading the cost of their payments without additional interest.

Read on: Stripe POS system review


(Photo source: strap)

Find out how Stripe Financial Services and Payments can help your business grow with an easy-to-use, high-performance, minimalist Stripe POS system.

Report authored by explains that the trend of consumer payments was started by the Swedish fintech Klarna and the Australian company Afterpay. In fact, in October 2021, Stripe, a financial services software company and POS systems provider, partnered with Klarna to offer businesses buy now, pay later options after Klarna successfully entered the consumer bank account market.

Other popular financial technology moguls such as PayPal, Amazon, and Apple also jumped into fashion and began adapting their own BNPL forms to keep pace with the competition.

Buy now Pay later, representative image

(Photo source:

To understand what BNPL is and how it became so popular, let’s go back to how it started. There were many other options such as layaway that large pack retailers have used in the past.

These options have largely disappeared due to the increased use of credit cards. Retailers have adopted their own versions with in-store credit cards, which are often stuffed into the point of sale, allowing the store to have greater control of the consumer experience and build brand loyalty with additional purchases. explains that the key elements of BNPL are typically smaller purchases rather than credit checking or traditional underwriting. BNPL services do not disclose user data to credit bureaus, therefore creditors do not have access to this debt.

There is no interest if payment is made on time, and typically 25% of the total purchase is paid at the time of purchase with three consecutive payments on a bi-weekly basis. The buyer is required to associate a debit or credit card with the BNPL purchase and agree to the automatic payments following.

How does BNPL work for companies?

BNPL is a third party vendor service that gives customers an alternative payment option at checkout. Here is a quick overview of the process.

1. A customer purchasing from you must undergo a quick credit check.

2. The BNPL provider then pays the seller owner (you) in full.

3. The customer is obliged to pay the external service provider over time in a series of installments.

4. The credit check is not in-depth and will not affect the buyer’s credit score.

The timeframe and percentage of installment payments depend on which third-party service the seller decides to include in theirs POS system. Favorite BNPL providers include Clearpay, Laybuy, PayPal and Klarna.

Some providers offer a specific number of payments, such as the PayPal Pay in 3 process, while others allow their customers to choose how much they want to pay over a period of three to twelve months.

Types of BNPL support options for retailers

Klarna: supplier's application Buy now pay later on the screen of the mobile device

(Photo credit: Klarna)

Retailers should consider two types of BNPL services: a transaction fee loan and a consumer interest loan.

Seller transaction fee loan

In the event of a transaction fee, the customer is not charged any interest on the total purchase as long as payments are made on time. Instead, the seller incurs a one-time transaction fee of an average of 2-8%. While this fee may deter some retailers, the BNPL option may lead to customer acquisition and retention and an increase in the purchase amount.

Consumer interest loan

The second option, i.e. the consumer loan for interest, is the interest on the purchase at the time of the transaction, thanks to which the business owner is free from additional fees. This is an attractive option for retailers, but may be less attractive to buyers.

What are the benefits of BNPL for business?

Top 10 benefits of BNPL for business owners:

1. The BNPL supplier, not the seller, is responsible for any chargebacks.

2. Convenience of transparency between BNPL vendor and business owner through the sales dashboard.

3. BNPL opens your company to a new base of customers who previously could not afford your product / service, which leads to greater sales and greater customer retention.

4. Ability to adapt to customers with unexpected or emergency purchases.

5. A new way to buy goods and services to improve your overall brand and customer experience.

6. BNPL helps to reach a specific, younger, modern demographic group of customers.

7. BNPL suppliers accept responsibility for purchasing fraud.

8. Reduce buyers’ hesitation with a convenient, realizable payment option.

9. Consumers don’t have to worry about having another credit card in their wallet as everything is done online, via the store and the mobile app.

10. Retailers can provide a comprehensive, branded shopping experience.

What are the types of Buy Now, Pay Later options?

With BNPL’s booming industry attracting substantial bank revenues and improving the overall shopping experience of many retailers, retailers are choosing to update their POS systems thanks to this new payment option. With so many suppliers entering the scene, which BNPL supplier should you choose for your company? hThere are five of our favorite options:

Supplier Repayment plans APRIL
Confirm 1- to 48-month point-of-sale loans with a limit of $ 17,500 per loan. 0%
Afterpay Customers can pay off 4 installments within 6 weeks with one prepayment (usually 25% of the order value), and then once every two weeks. 0%
ZIP Customers can choose from four interest-free payments over a six-week period. There is a fee of $ 7 for each late installment (this amount may vary by statute and state). Sellers are charged a transaction fee of $ 4 for each purchase or $ 1 for payment 0%
PayPal Customers make payments in four installments every two weeks (for a total of six weeks). The first payment is due at the time of purchase. 0%
Sezzle Clients make four installments within six weeks. If you take advantage of the free rescheduling of one of your payments, technically you can pay within 8 weeks. 0%

Most of these providers offer applications that consumers can download to their mobile phones or tablets for easy access to their payment options. Popular online retailers such as Amazon also offer their own buy now, pay later services.

Final thoughts on BNPL

a woman using an apple watch to make a payment at a pos terminal

(Photo credit: Getty)

For companies

At this point, traders have a relatively safe opportunity to increase sales and attract new, younger customers with Buy Now, Pay Later services. Retailers should be aware that as this payment method develops, so does the associated risks of fraud.

Stay up to date with anti-fraud tools and news so you don’t get caught off guard and enjoy offering your customers a new opportunity to spend more and leave satisfied.

For customers

It should be noted that the consumer buy now, pay later method is not currently financially regulated, meaning customers have little protection in the event of a possible financial dispute.

There are regulations in Great Britain will be introduced soon in the near future. It is uncertain how soon this will happen in the US as products and services purchased through BNPL are not covered by long-term credit products / services regulated by the Truth in Lending Act.

Are you looking for a POS system supported by BNPL? Check out our guides for choosing the best POS systems for small businesses, POS systems for restaurantsand POS systems for retail.