Buy now, pay later: how can it work for my business?

Buy now, pay later, or BNPL for short, is a form of financing that lets customers pay for something over time. It generally can be categorized into two types: invoicing and installments.

Invoicing

The customer checks out without paying anything and needs to repay the full amount in 14-30 days. This is a zero interest option and most popular in Europe.

Installments

The customer repays the balance in bi-weekly or monthly payments. For some BNPL solutions, a deposit is collected at time of purchase. This is most popular in North America.

Very simply, the customer makes a payment via a buy now, pay later payment method. The BNPL provider pays the merchant the full purchase amount. The customer then repays the BNPL provider either the full amount or in installments.

On a more detailed level, a repayment works differently depending on if it’s classed as a credit loan or a deferred payable. With a credit loan, BNPL is accounted for as a customer loan. With a deferred payment the merchant buys an “I owe you” (IOU) from the BNPL provider. This difference can affect the repayment terms for the customer and the contracting terms for the merchant.

BNPL providers have different terms and conditions on certain topics, including:

• Repayment periods. Customers either need to make the repayment in full at the end of the month (like credit cards), or pay in installments on a weekly, biweekly, or monthly basis.

• Late fees. There are a range of associated fees when a customer doesn’t pay on time. For instance, interest or late fees, monthly fees, or account reopening fees.

• Payment channels and types. They also cater to different channels and payment types, like in-person, online, and recurring payments.

• Marketing requirements. Some expect advertisements on the merchant’s website, like promo banners, and marketing budget allocation.

Offering a buy now, pay later solution can be advantageous, but it can work better for some businesses than others. Pinpointing exactly where a BNPL solution can help your business can ensure you see the benefits you expect. Below you can see how well your goal lines up with what a BNPL solution can offer.

If you have the resources available, and are unsure if a BNPL solution will benefit your business; test it out. A test run with an implemented BNPL solution can help to show whether it has the desired impact with your customers and resonates well with your audience. With Adyen, you can quickly turn on and off and test different payment methods through one integration.

The next step, once you’ve decided to implement a BNPL solution, is to pick one that fits best with your business.

BNPL solutions have different settlement delays and can impact different performance metrics like conversion rates, average transaction value (ATV), and authorization rates. Adding new payment methods can also cannibalize existing ones. It's a good idea to monitor these metrics when you go live with a BNPL solution to understand the impact

To give you an idea of the solutions out there, here are the most popular buy now, pay later companies globally:

Affirm

Affirm partners with over 6,000 retailers in the US across categories like apparel and accessories, beauty, home and lifestyle, and electronics. They offer flexible financing programs for businesses of all sizes, from mass retailers to local shops.

Afterpay & Clearpay

Originally from Australia, Afterpay is also available in New Zealand, the US, and Canada, as well as the UK, France, Italy and Spain where they operate under the brand Clearpay. They offer shoppers the option to pay in four interest-free installments and promise high authorization rates.

Atome

* The ATV maximum for Atome varies based on the market and card type. Merchants can request for higher transaction limits, subject to Atome approval.

Atome is available in Singapore and Malaysia with Adyen and is expected to expand into more countries soon. It supports both ecommerce and in-person (dynamic QR) payments. Merchants are settled in full upfront, while shoppers pay 0% interest installments.

Klarna

* The ATV maximum for Klarna varies based on the market.

Klarna is one of the world’s largest buy now, pay later providers with strong brand recognition in the EU and growing presence in the US and APAC. Boasting over 140 millions users, Klarna accepts both one-off and recurring payments.

Zip

Zip is one of the main 'buy now, pay later' services across a number of countries including Australia, New Zealand, the United States (formerly QuadPay), and Canada. They provide interest-free purchases both online and in-person, as well as an open-loop virtual credit card solution in Australia.

With a buy now, pay later solution, the payment experience can become more seamless and draw new audiences. The BNPL market is still evolving with new solutions made on a country to country basis.

With a multitude of options available, it can be difficult to navigate the BNPL stage. Check out our payment method explorer to easily compare and choose a buy now, pay later solution fit for your business.