How Buy Now Pay Later is Transforming E-Commerce

Oct 12, 2022 8:15:00 AM
6 min read

Over the years, e-commerce has undergone tremendous changes—especially since the COVID-19 pandemic. As more shoppers turned to the internet to get their next shopping fix (71% more, to be exact), the desire for alternate payment options increased significantly. Younger generations in particular, sought out new ways to pay outside of traditional methods like cash and credit.

Insert BNPL. 

Buy Now, Pay Later (BNPL) is quickly becoming an indispensable component of any e-commerce business because it allows customers to buy items immediately, and then pay the total owing back in installments.  During the pandemic, 51% of consumers used a BNPL service. Today, the BNPL market is worth over $150 billion and is expected to surpass $3 trillion by 2030.

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The reality is Buy Now, Pay Later isn’t just transforming the way people shop, but how retailers do business. In this article, we’ll cover everything you need to know about BNPL, including all the benefits it has to offer both e-commerce stores and their customers. 

Reasons Consumers Use BNPL Services

According to research from Insider Intelligence, the four main reasons American shoppers use Buy Now, Pay Later are:

  • to steer clear of credit card interest
  • to make purchases they otherwise wouldn’t be able to;
  • to borrow money without a credit check; and 
  • disliking using credit cards altogether.

BNPL solutions enable shoppers to purchase products—or services—and then pay a predetermined number of installments over a set period of time. In most cases, these payments are offered to consumers with little to no interest or hidden fees, which makes them a desirable option to many people.

How Buy Now, Pay Later Works

Homepage_solution@ - SquareAt checkout, the customer chooses to pay using the Buy Now, Pay Later option (sometimes shown as a Payments or Installments option), which splits the total cost of their purchase into a handful of payments  over a period of weeks or months. Upon approval, the customer pays the first payment at checkout (usually around 25% of the total amount owing) and submits their order to be processed.  

The remainder of the purchase amount is then covered by the BNPL provider. Over the next few weeks or months, payments are taken out, either from credit or debit, until the balance is paid off in full. If the customer fails to pay an installment on time, they will automatically be charged extra fees until the payment is made. Lack of payment can also result in denial of future Buy Now, Pay Later services from that provider. 

Buy Now, Pay Later Benefits

PartnersThe advantages of offering BNPL work in favor of both the online stores that offer it and the customers who use it.  

For Consumers

It’s incredibly convenient.

Shoppers are fans of Buy Now, Pay Later because of its quick approval process and ease of use. In fact, over 37% stated convenience as being their primary reason for using this service.

It provides lower fees and interest-free payments.

Unlike credit cards that charge high-interest rates and fees, BNPL offers little to no rates and fees, unless you miss a payment. 

It’s a more flexible solution.

43% of Buy Now, Pay Later users think it’s more flexible than other payment methods, thanks to being able to spread out the payments for a purchase while still receiving it at the same time you would if you paid entirely upfront. 

For Online Retailers

It attracts more shoppers.

BNPL is an inclusive payment experience that enables more shoppers to complete a purchase they perhaps couldn’t have bought otherwise. A recent study confirmed this by finding that 45% of BNPL users opt for this solution to buy items that don’t fit in their budget. The more visitors you attract to your site, the higher the chance of converting them into paying customers

It enhances the customer experience.

Aside from providing customers with the opportunity to get their digital products sooner, having a simple financing option like BNPL can also establish more brand trust with your customers—particularly the 41% of younger generations who say they’d probably use Buy Now, Pay Later services for household purchases.

Related: 10 Ways to Enhance the Customer Experience

It boosts conversion rates and increases sales.

Here’s a nice fact: Businesses that offer BNPL services, see an average 20-30% increase in conversion rates. Even better, 60% of online shoppers have already used Buy Now, Pay Later for at least one purchase in the past year. And even better – with more people being able to buy, thanks to this flexible solution, you’ll be able to reduce the number of abandoned shopping carts.

Put this all together, and you have a no-brainer when it comes to boosting conversion rates, simply by offering your customers more purchasing power. 

Buy Now, Pay Later Providers

The list of BNPL providers keeps getting longer, with competition growing more and more each year. Currently, there are several options to choose from, with varying terms & conditions to consider for your e-commerce store. Here are some of the most popular direct BNPL providers:


Located in Minneapolis, Sezzle has 3.4 million active customers and 46,000 active merchants on its platform. 

Payment Terms: Four installments, collected over six weeks

Interest & Fees: No interest; $10 account reactivation fee for missed payments


A Swedish financial technology company, Klarna is one of the more well-known BNPL apps, partnering with businesses in almost 20 countries worldwide.

Payment Terms: Four installments, every two weeks, with additional payment options available

Interest & Fees: No interest; $7 late fees for missed payments


Launched in Australia in 2014, Afterpay currently has over 19 million customers and 122,000 brands all across the globe.  

Payment Terms: Four installments, collected over six weeks

Interest & Fees: No interest; Late fee for up to 25% of purchase price

PayPal Pay in 4

As of August 2020, PayPal officially launched PayPal Pay in 4, offering its current customers a Buy Now, Pay Later option for millions of its retail partners.

Payment Terms: Four installments, every two weeks

Interest & Fees: No interest; late fees for late payments, which vary according to location


Formerly known as Quadpay, Zip is an Australian Buy Now, Pay Later provider that serves both online and in-store customers in 12 international markets.

Payment Terms: Four installments, collected over six weeks

Interest & Fees: No interest; $7 late fees for missed payments


A publicly traded fintech company in San Francisco, Affirm was created to support small, everyday purchases, and has over 29,000 retailers. 

Payment Terms: Four installments, every two weeks or monthly, depending on purchase size

Interest & Fees: Zero to 30% interest, depending on the payment plan and user eligibility; no fees

Choosing the Right BNPL Provider for Your Online Business 

error_shrugWith so many options out there, it can be confusing to know which Buy Now, Pay Later solution is best for your e-commerce store. When sorting through your options, ask yourself these four questions:

  • Who am I selling to?
  • Which markets am I selling to, operating out of, and located in?
  • What are the repayment terms? 
  • Do their credit limits align with what I sell, and the price point I sell it at?

Once you have this information, you’ll be a few steps closer to narrowing down your list before making the best selection for your business and customers.

BNPL Takeaways

With credit cards declining in popularity and non-traditional payment options becoming the newest “trends” on e-commerce sites, keeping up with what’s in—and more importantly, what will get you the most sales—is something you should always stay ahead of. 

Buy Now, Pay Later is a customer service-oriented payment method that allows more shoppers to complete purchases, even if their paycheck is a few days away. This translates to increased revenue and conversion rates, higher average order values, and happier customers who know your store provides a chance for them to buy more, in a hassle-free manner. You get more sales, and they get more control over their budgets and purchases.

Take Your Conversions Even Further

Shaking_hand_math@2xWant to find out how to get more sales across the finish line and convert visitors to actual paying customers? Granify can help you create tailored experiences for every shopper that visits your site. They’ll get personalized recommendations that meet their online shopping needs, and you’ll get more conversions to boost your revenue, year after year.

Start Planning Today