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

With a new repayment incentive, buy now, pay later options to drive a new line of customers for retailers.

Many retail business owners using POS systems adopt a Buy Now, Pay Later (BNPL) payment model to reach a wider range of customers. The BNPL method has evolved largely due to changes mandated by COVID-19 and the rise in online shopping. So, what exactly is BNPL for business, and how can it help you increase profits faster? We investigate the answers to this question to assist you in getting started and attracting a new type of customer.

Buy Now Pay later for Businesses

What exactly is buy now, pay later? Definition of BNPL

According to Worldpay's latest figures, as reported by, "BNPL is now the fastest-growing online payment method – accounting for more than 5% of all eCommerce spending." This has caused the BNPL for businesses market to triple by 2020, with 5 million people using BNPL since the pandemic began."


This payment process allows consumers to spread out the cost of purchasing goods and services over six weeks in four equal payment instalments. The time it takes to repay the money, and the amount of each payment instalment can vary.


At first glance, this appears to be the same as layaway or simply using a credit card. So, what's the distinction? One significant difference is that many BNPL options do not include interest. Another thing to remember is that the retailer requires the consumer to choose payment options upfront, such as six payments on a specific date, which is predetermined with the purchase.


The consumer payment trend was started by Swedish fintech Klarna and Australian firm Afterpay. Other well-known financial technology titans, such as PayPal, Amazon, and Apple, have also jumped on the bandwagon and begun developing their forms of BNPL to keep up with the competition.


A brief history of how BNPL came to be so popular

To comprehend what BNPL for businesses is and how it became so popular, we must first go back. In the past, big-box retailers have used a variety of other options, such as layaway.


These options have largely vanished as credit card usage has increased. Retailers adopted their versions, with store credit cards frequently pushed at the point of sale, allowing the store to control the consumer experience and build brand loyalty with additional purchases.


The key elements of BNPL are typically smaller purchases, no credit check, and no traditional underwriting. Because BNPL for businesses services do not share user data with credit bureaus, creditors do not have access to this debt.


There is no interest if payments are made on time, and typically 25% of the total purchase is paid at the time of purchase, with three follow-up payments made every two weeks. The purchaser must link a debit or credit card to the BNPL purchase and agree to automatic payments.


How does BNPL benefit businesses?

BNPL for businesses is a service supplier provided by a third party that provides customers with an alternative payment option during the checkout process. Here's a quick rundown of the procedure.


1-The customer who is purchasing from you must pass a quick credit check.

2-The BNPL provider then pays the retailer owner (you) the entire amount.

3-The customer must repay the third-party service provider in instalments over time.

4-The credit check is superficial and has no bearing on the purchaser's credit score.


The third-party service determines the time frame and percentage of instalment payments that the retailer integrates into its POS system. Clearpay, Laybuy, and PayPal are among the most popular BNPL providers.


Some providers, such as PayPal's 'Pay in 3' process, offer a set number of payments, whereas others enable their buyers to choose how much they want to pay over three to twelve months.


BNPL service options for retailers come in a variety of forms.

Retailers can choose between two types of BNPL services: a merchant transaction fee loan and a consumer interest loan.


1-Loan for merchant transaction fees

As long as payments are made at the proper time, the customer is not charged any interest on their overall purchase when using a merchant transaction fee. Instead, the merchant pays a one-time transaction fee ranging from 2 to 8 per cent on average. While this fee may deter some retailers, the option of BNPL for businesses may result in customer acquisition, retention, and higher purchase amounts.


2-Consumer interest loan

The other option, a consumer interest loan, involves an interest rate being applied to the purchase at the transaction, thereby relieving the business owner of additional fees. This is an appealing choice for retailers, but it may be less appealing to customers.


In a Nutshell:

It must be noted that the Buy now, pay later consumer repayment process is currently unregulated, which means customers have little protection in the event of a financial dispute.



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