BNPL ( Pay Later) is a payment method that splits the purchase price into smaller installments, typically 4 payments over 6-8 weeks. Providers like Klarna, Afterpay, and Affirm handle credit risk while merchants receive full payment upfront.
How BNPL Works
For customers:
- Choose BNPL at checkout
- Complete quick credit check (soft pull)
- Pay first installment immediately
- Remaining payments auto-deducted on schedule
- Often interest-free if paid on time
For merchants:
- Receive full payment immediately (minus fees)
- BNPL provider assumes all credit risk
- Integrate via checkout widget or
- Pay 2-8% per transaction (varies by provider)
Impact on Conversions
According to PayPal data, for small and midsized businesses using Pay Later is 20% higher than standard orders. For large enterprise retailers, Pay Later runs 55% higher than standard PayPal transactions.
BNPL also increases checkout conversion rates. Payment flexibility removes price as a barrier for customers who want items but prefer spreading costs.
Common BNPL Providers
Klarna: Popular in Europe, offers pay-in-4 and longer financing options.
Afterpay/Clearpay: 4 installments, popular with younger shoppers in fashion and beauty.
Affirm: Offers longer-term financing up to 36 months for higher-ticket items.
Shop Pay Installments: Shopify's native BNPL with competitive rates.
Implementation Considerations
Integration complexity: Most providers offer Shopify and WooCommerce plugins. Custom builds need API integration.
Fee structure: Compare percentage fees vs flat fees based on your average order value.
Target audience: BNPL appeals most to shoppers aged 18-44.
Category fit: Fashion, electronics, and homeware see the strongest results from BNPL adoption.
