Buy Now Pay Later: How to Accept BNPL Payments and Understand the Global Trend

The number of BNPL options are booming—as is the volume of people using them. Despite being a relative newcomer to the world of payment methods, the rapid adoption of buy now pay later (BNPL) across the globe has made it an option you simply cannot ignore as an online retailer. At least not if you want to remain competitive.

What is buy now, pay later?

Buy now, pay later, also referred to as point-of-sale loans or point-of-sale financing, is a short-term financing option. It gives customers the ability to purchase products in incremental payments. In other words, it’s exactly as it sounds: consumers buy their goods now and pay for them later. While the concept of BNPL isn’t an entirely new one—shoppers have been using payment plans for decades to spread the cost of their purchases—it’s only really been an option for US retailers since 2015, when Swedish Fintech, Klarna, introduced it as an ecommerce payment method.

BNPL apps integrate seamlessly with merchant stores allowing the shoppers to carry on their activities easily and settling the bill offsite with the deferred payment provider. The shopper can then pay for items received in multiple installments later. Additionally, BNPL accounted for 2.1% of all global ecommerce transactions in 2020—that’s $97 billion worth of goods. Experts predict it will account for 4.2% of transactions by 2024, making it the fastest-growing payment method.

How does buy now, pay later work?

Either way you look at it, buy now, pay later is booming. And it’s changed how we shop online. While different BNPL providers will operate in slightly different ways, here’s what typically happens when you offer buy now, pay later as a payment option on your ecommerce website:

• A customer heads to the checkout to complete their purchase, selecting a buy now, pay later option.
• The BNPL provider runs a quick eligibility check on the customer to check they can afford repayments, usually in the form of a soft credit check.
• If approved, the customer completes their purchase and you ship their goods as normal.
• You receive the payment in full from the BNPL provider minus any transaction or processing fees. While the fee structure will be dependent on the provider you use, expect this to be anywhere between 2% and 10% of the payment processed.
• The BNPL provider will recoup their money from the customer either in installments or at a later date.

The Benefits and Adoption of BNPL Services

We can split the benefits for BNPL service providers into two categories: benefits to consumers and retailers. Regarding consumers, a significant 47% of BNPL users say that they turn to this service to make purchases that may otherwise be financially unfeasible. Other factors are also driving adoption:

• 33% of consumers use BNPL to avoid credit card interest.
• 24% of consumers use BNPL to borrow without a credit check.
• 15% of consumers opt for BNPL due to difficulties in obtaining approval for credit cards.

Retailers also see significant advantages. For example, Lyre's increases landing page conversion rate by 15% with Shogun tools, and Nextbase boosts conversions by 122% with Personalization. These relevant shopping experiences are part of the broader growth in the sector. However, merchants should note that contributing to consumer debt, payment fraud, and product return hassles are things many ecommerce merchants are concerned about when offering BNPL.

Market Statistics and User Demographics

The younger generation, specifically Generation Z, emerges as a driving force behind the proliferation of BNPL, with nearly half of Gen Z individuals expected to embrace BNPL by 2025. Data reveals that gender and race also play a role. Men tend to use BNPL more than women, with 62.8% of males and 51.36% of females utilizing BNPL services. Black consumers exhibit a significantly higher likelihood of utilizing BNPL platforms compared to their White counterparts, about 63% more likely to use BNPL platforms than White consumers.

The following table illustrates the percentage of BNPL users by generation and the projected growth over time:

Generation	2021	2023	2025	% Change
Gen Z	36.80%	46.50%	47.40%	↑ 10.6%
Millennial	30.30%	39.50%	40.60%	↑ 10.3%
Gen X	17.20%	26.30%	30.90%	↑ 13.7%
Baby Boomers	6.20%	12%	14.80%	↑ 8.6%

In the ever-expanding BNPL landscape, consumers have a plethora of buy now, pay later apps to choose from. According to Statista Consumer Insights, PayPal emerges as the frontrunner, capturing the lion's share of the market with its interest-free "Pay in 4" option. Other major players include Klarna, Clearpay, and Affirm, which provide tailored and localized shopping experiences.