Should You Offer Buy Now, Pay Later? Find Out in 2 Minutes!

The Buy Now, Pay Later (BNPL) payment gateway is a new age eCommerce, offering customers the flexibility to divide their purchases into smaller, interest-free (or low-interest) installments.

This payment solution is rapidly gaining popularity, helping businesses boost conversions, reduce cart abandonment, and attract more customers who prefer financial flexibility over upfront payments.

In this blog, we’ll cover:

What BNPL is and how it works
Why businesses should consider adding BNPL to their Shopify store
Key differences between BNPL and traditional payment gateways
A deep dive into popular BNPL providers
A side-by-side comparison of BNPL gateways to help you pick the best one for your store
How to decide if BNPL is the right fit for your business

By the end of this guide, you’ll have a clear understanding of how BNPL can impact your sales, customer experience, and profitability—and whether it’s time to integrate it into your Shopify store.

The Rise of Buy Now, Pay Later (BNPL) Payment Solutions

Imagine you’re shopping online for a Coach bag priced at C$480. At the product page, you see payment options:

A store with Buy Now Pay Later payment option.

The available payment options are:

💳 Pay C$480 upfront or

💰Split it into 4 equal payments of C$120.00—interest-free.

Suddenly, the $480 product feels much more affordable when broken down into smaller, manageable payments.

The Result? A Win-Win for Both Customers and Storeowners.

A Smart Payment Solution for Both Sides

BNPL is transforming the way customers shop and businesses sell. In this blog, we’ll break down everything you need to know—from how BNPL works to which provider is best for your Shopify store.

What is a Buy Now, Pay Later (BNPL) Payment Gateway?

A Buy Now, Pay Later (BNPL) payment gateway is a financing solution that allows customers to purchase products immediately and pay for them over time in installments.

Unlike traditional credit cards, most BNPL options offer;

Interest-free payments (if paid on time)
Require minimal credit checks

How Does BNPL Work?

Customers select BNPL at checkout: Instead of paying the full amount upfront, they choose a BNPL provider (like Klarna, Afterpay, or Affirm).
Instant approval and payment split: The BNPL provider quickly evaluates the customer’s eligibility and splits the purchase into equal installments.
Merchant gets paid upfront: The business receives the full payment (minus a small fee) from the BNPL provider, reducing financial risk.
Customer repays over time: Payments are automatically deducted from their account on a schedule (e.g., bi-weekly, monthly).

Why Use BNPL for Your eCommerce Business?

The Buy Now, Pay Later (BNPL) model isn’t just a trend—it’s a powerful tool that can increase sales, improve customer experience, and drive business growth. Here’s why integrating BNPL into your Shopify store is a smart move:

Higher Conversions & Lower Cart Abandonment
- Many customers abandon their carts due to high upfront costs. BNPL eliminates this barrier, allowing them to complete their purchase without financial strain.
Increased Average Order Value (AOV)
- Shoppers tend to spend more when they can split payments into interest-free installments, which leads to bigger orders and more revenue.
Appealing to Millennials & Gen Z
- Younger shoppers prefer BNPL over credit cards due to easier approvals and no interest on short-term plans. Offering BNPL helps you attract a growing segment of digital-first consumers.
Immediate Payment with Low Risk
- Merchants receive full payment upfront from the BNPL provider, while the provider assumes the risk of collecting future payments from customers.
Gaining a Competitive Edge
- Many leading eCommerce stores already offer BNPL. If your competitors provide flexible payment options and you don’t, you risk losing potential customers.
Encourages Repeat Purchases
- Shoppers who successfully use BNPL once are more likely to return for future purchases, leading to better customer retention and loyalty.

How BNPL Differs from Traditional Payment Gateways

At first glance, Buy Now, Pay Later (BNPL) payment gateways might seem like traditional payment methods, but they operate quite differently. Understanding these differences is key to deciding whether BNPL is the right choice for your Shopify store.

The table below highlights the key differences between Buy Now, Pay Later (BNPL) services and traditional payment gateways, showcasing how each payment method impacts customers and merchants.

Parameter	Traditional Payment Gateways	Buy Now, Pay Later
Payment Structure: Pay Now vs. Pay Later	Customers pay the full amount upfront at checkout.	Customers split payments into installments, often interest-free, making purchases more affordable.
Credit Checks & Approval Process	Credit card transactions require prior approval from banks, and some customers might not have access to credit.	Many BNPL providers offer instant approvals with minimal or no credit checks, making it easier for shoppers to qualify.
Fees & Costs for Merchants	Charge standard transaction fees to merchants (2-3%) but no additional financing fees. Customers don’t pay any additional fee.	Providers charge merchants higher fees (3-6%) in exchange for handling customer payments and assuming risk.
Customer Risk vs. Merchant Risk	The merchant receives full payment immediately, but chargebacks and fraud can be a risk.	The BNPL provider pays the merchant upfront, takes on the repayment risk, and handles disputes, reducing financial risk for businesses.
Impact on Customer Spending Behavior	Customers may hesitate to make large purchases due to immediate payment requirements.	Customers are likelier to spend more and purchase higher-ticket items, boosting your Average Order Value (AOV).

Popular BNPL Payment Gateway Providers- Which one is right for your store?

With the increasing demand for Buy Now, Pay Later (BNPL) solutions, several providers have entered the market, offering unique financing options, country availability, and integration features.

Globally, BNPL accounts for approximately 5% of all e-commerce transaction volume, highlighting its growing adoption among online retailers.

Below is a breakdown of the most popular BNPL payment gateways and what they offer.

BNPL Provider	Available In	Installment Options	Merchant Fees	Credit Check	Best For
Shop Pay Installments (Powered by Affirm)	USA, Canada	Pay in 4 interest-free installments or monthly financing for larger purchases.	Varies based on the merchant's agreement with Affirm	No credit check for Pay in 4; soft credit check for monthly financing	Shopify merchants looking to offer flexible payment options and boost conversion rates
Klarna	USA, UK, Europe, Australia	Pay in 4 (interest-free), Pay in 30 days, 6-24 month financing	3-5% per transaction	Soft credit check (for financing)	Fashion, beauty, and lifestyle brands
Afterpay (Clearpay)	USA, UK, Australia, New Zealand, Canada	Pay in 4 interest-free installments (every two weeks)	4-6% per transaction	No credit check	Small to mid-sized businesses selling consumer goods
Affirm	USA, Canada	Pay in 4, 6, 12, or 24 months (some with interest)	4-6% per transaction	Soft or hard credit check (depending on loan amount)	High-ticket items like electronics, travel, and furniture
PayPal Pay in 4	USA, UK, Australia, Germany, France	Pay in 4 interest-free installments	Standard PayPal transaction fees apply	No credit check	Businesses already using PayPal for payments
Sezzle	USA, Canada	Pay in 4 interest-free over 6 weeks	3-5% per transaction	Soft credit check	Small businesses and sustainable brands
Zip (formerly Quadpay)	USA, UK, Australia, New Zealand	Pay in 4 interest-free installments	3-5% per transaction	No credit check	General eCommerce retailers

What to Consider When Choosing the BNPL Provider for Your Store

Each BNPL provider serves different markets and business models. When selecting a provider, consider:

Country Availability
- As the comparison table above shows, not all BNPL providers operate globally. To maximize customer reach, choose a provider that supports your target market.
Installment Flexibility
- Klarna and Affirm offer longer-term financing (6-24 months), making them ideal for high-ticket items.
- Afterpay, Sezzle, and Zip focus on short-term, interest-free plans, which are better for lower-priced products.
Merchant Fees & Costs
- BNPL fees range from 3% to 6% per transaction (charged to merchants), higher than standard payment gateways.
- Consider whether the increase in conversions and order value outweighs these costs.
Credit Check Requirements
- Some providers (Affirm, Klarna) conduct soft or hard credit checks, which may impact customers with lower credit scores.
- Others (Afterpay, Zip, Sezzle) approve customers without credit checks, making them more accessible to a broader audience.
Shopify Integration & Ease of Use
- Most BNPL providers offer seamless Shopify integration with easy setup.
- PayPal Pay in 4 is an excellent choice if you already use PayPal on your store.

Adding the right BNPL provider can enhance your checkout experience, attract more customers, and drive higher sales—helping your business stay ahead in the competitive eCommerce market.

When BNPL Might Not Be Ideal For Your Business

While Buy Now, Pay Later (BNPL) can be a game-changer for many eCommerce businesses, it’s not the right fit for everyone. Before integrating BNPL into your Shopify store, consider these scenarios where it may not be the best option.

Your Business Has Tight Margins
- BNPL providers charge higher merchant fees (3-6%) than traditional payment gateways.
- If your profit margins are low, these fees might cut into your earnings.
You Sell Low-Cost or Impulse Purchase Items
- If your average order value is under $30-$50, BNPL may not be necessary.
- Many BNPL providers have minimum transaction requirements.

Here’s a table summarizing the minimum and maximum purchase amounts for various BNPL providers eligible for split payments:

BNPL Provider	Minimum Purchase Amount	Maximum Purchase Amount
Affirm	$50	$17,500
Afterpay	$1	$1,000 – $4,000 (varies by region)
Klarna	$10	Varies by customer; no predefined limit.
Zip	$300.00 AUD (Australia)	$50,000 AUD (Australia)
Sezzle	$20	Varies by customer; typically up to $2,500
PayPal Pay in 4	$30	$1,500

Note: The maximum purchase amounts for Klarna and Sezzle are determined based on individual customer assessments and do not have predefined limits.

These figures can vary based on factors such as customer creditworthiness, merchant agreements, and regional regulations. It’s advisable to consult each provider’s official guidelines or contact them directly for the most accurate and up-to-date information.

Your Customer Base Prefers Traditional Payment Methods
- If your audience consists of older shoppers or B2B clients, BNPL adoption may be lower.
- Conduct market research before adding BNPL to ensure it aligns with customer preferences.

FAQs About BNPL Payment Gateways

As Buy Now, Pay Later solutions become more popular, many eCommerce owners have questions about how they work, their impact on customers, and their business implications. Below are some of the most frequently asked questions about BNPL payment gateways.

Does BNPL affect customers’ credit scores?
- Short-term BNPL plans (Pay in 4, Pay in 30 days): Usually do not impact credit scores, as most providers don’t report payments to credit bureaus.
- Long-term BNPL plans (6-24 months financing): Some providers (like Affirm and Klarna) may perform a soft or hard credit check, which could affect the customer’s credit score.
How do refunds and chargebacks work with BNPL?
- When a customer requests a refund, the BNPL provider reimburses the customer and adjusts the installment plan accordingly.
- Depending on the provider’s policies, sellers may still be responsible for transaction fees.
- Chargeback disputes are handled by the BNPL provider, reducing the seller’s risk.
What are the hidden costs for store owners?
- BNPL providers charge higher transaction fees (3-6%) compared to traditional payment gateways.
- Some providers may have set up or monthly subscription fees (varies by provider).
- Late fees charged to customers do not impact sellers but could affect customer satisfaction.
How easy is it to integrate BNPL with Shopify?
- Most BNPL providers offer direct Shopify integration through apps and plugins.
- The setup process usually involves installing the BNPL app, creating an account, and enabling it at checkout.
- PayPal Pay in 4 is automatically available if PayPal is already integrated with your Shopify store.
Can BNPL work for all types of products?
- BNPL is best for higher-value purchases (fashion, electronics, furniture, travel, etc.).
- Some providers restrict the sale of certain products (e.g., digital goods, subscriptions, alcohol, and gambling-related services).
- Always review the provider’s terms to ensure your products are eligible.
How do BNPL providers make money?
- From merchants: BNPL companies charge a percentage-based fee per transaction.
- From customers: Some BNPL providers charge late fees or interest on long-term installment plans.
What happens if a customer fails to make payments?
- The BNPL provider takes responsibility for collecting payments, not the seller.
- Customers who miss payments may incur late fees or account restrictions for future BNPL purchases.
Is BNPL a better alternative to credit cards?
- BNPL is easier to access, has no interest (for short-term plans), and requires no traditional credit approval.
- However, credit cards offer more flexibility and rewards programs that some customers may prefer.

Conclusion: Is BNPL the Future of eCommerce Payments?

The Buy Now, Pay Later (BNPL) model has quickly transformed from a trend into a must-have payment option for eCommerce businesses. By offering flexible, interest-free installment plans, BNPL makes shopping more accessible for customers while helping businesses increase conversions, boost average order value (AOV), and reduce cart abandonment.

The future of eCommerce is all about convenience and flexibility—and BNPL is a big part of that shift. If you’re looking to boost sales and enhance the customer shopping experience, now might be the perfect time to integrate BNPL into your Shopify store.

Action Plan: How to Start Using BNPL and Boost Sales Today!

💡 Ready to take action? Here’s what you should do next to implement BNPL and start increasing conversions:

1️⃣ Evaluate Your Business Needs – Does your product pricing and target audience align with BNPL?

2️⃣ Compare BNPL Providers – Review merchant fees, installment options, and country availability.

3️⃣ Check Shopify Integration – Ensure your chosen BNPL provider seamlessly integrates with your eCommerce store.

4️⃣ Set Up BNPL on Your Store – Install the provider’s app and configure it in your checkout settings.

5️⃣ Update Your Product Pages – Highlight BNPL options on product pages to boost visibility.

6️⃣ Monitor Performance – Track sales, cart abandonment rates, and customer response.

7️⃣ Promote BNPL to Customers – Use banners, pop-ups, and email marketing to inform shoppers.

🚀 Final Step: Start offering Buy Now, Pay Later and watch your sales grow!

Buy Now, Pay Later Payment Gateway: The Ultimate Guide to BNPL Payment Solutions