Online Payment Options in E-Commerce: Buy Now, Pay Later and 7 Reasons Why It Should Be a Staple in Your E-Commerce Strategy

Online Payment Options in E-Commerce: Buy Now, Pay Later and 7 Reasons Why It Should Be a Staple in Your E-Commerce Strategy

You may be familiar with Buy Now, Pay Later as a concept. Perhaps you saw it the last time you were in a mattress store, or when you were browsing your favorite online clothing store from where you and your colleagues were working in silos

More and more e-commerce businesses are offering Buy Now, Pay Later as a payment option and it’s a popular choice amongst shoppers with 60% of people having used BNPL.

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Let’s delve into what Buy Now, Pay Later is, top reasons why it should be included in your finance team’s e-commerce strategy, and some popular BNPL options on the market. 

What is Buy Now, Pay Later (BNPL)?

What exactly is Buy Now Pay Later? Simply put, it’s an interest-free payment you can make over several installments, that’s why it acts as a type of an installment loan. 

Unlike credit cards, which allow you to spend money before you have it and then pay back the credit card company with interest, Buy Now Pay Later services allow consumers to pay for their items in smaller amounts spaced out over the course of a few weeks or months. They also get to receive the item they’ve ordered up front with zero interest fees. 

Why e-commerce customers love to purchase online with BNPL

1. People can’t afford as much as they used to 

With the cost of living going up but salaries staying the same or even stagnating, people just don’t have as much spending power as they did before. Global instability and widening inequalities mean that the average person can’t splash out on luxury items as easily. 

We’re increasingly seeing people turn to second-hand items and stores to make ends meet, as well as item sharing and borrowing apps, food waste-avoidance apps, and other ingenious methods for helping the planet and surviving with less money. 

Offering a Buy Now, Pay Later system allows people who may in the past have used similar systems to pay for a car or a house to pay for more basic necessities like clothing, or a couch. The cost of living has simply gone up for the average person, and Buy Now, Pay Later is one financial system that customers are turning to in order to purchase things that their incomes might not otherwise allow. 

2. Buy now, pay later is a more attractive payment option than using credit cards

People are tired of being in constant credit card debt, so BNPL offers people a way around that by removing the interest rates that credit cards have, but still allowing people to make purchases they don’t have the upfront funds for. 

Instead of amassing debt, flexible payments allow people a little more peace of mind. So how do BNPL companies make money? Are there any fees? Well, quite often the price of items will be marginally hiked up for all consumers in order to turn a profit for the BNPL company. 

An item that might have originally been listed at, say, $188 will be listed at perhaps $196. Whether you pay in one lump sum or over a period of time makes no difference to you as a consumer (in terms of how much money you ultimately pay), but choosing BNPL means that the BNPL company will still turn a profit. 

Ultimately, the consumer knows exactly how much they’ll have to pay overall, and BNPL feels like a zero-risk option compared to credit cards. Buy Now, Pay Later seems like a good financing solution.

3. Convenience of BNPL – easy payments

If you’re staring at a near-empty bank account, it’s convenient to have the option of BNPL because it allows you to continue with your purchases without having to wait until your next paycheck rolls in, and without using credit cards. Basically, you can shop now.

Services like Clearpay allow you to easily create an account and make 4 payments, one every 2 weeks or so. So you can buy that Bridesmaid’s dress for your best friend’s wedding without having to borrow money from your parents or getting into debt (or even worse: missing your friend’s wedding altogether). 

A lot of people can find themselves in dire straits at a moment’s notice; a relationship breakdown, job loss, theft, home burnt down, you name it. Life can be very unsteady, and having the option to Buy Now, Pay Later can make things a little easier for people who might not have funds up front, or who might not have a great credit score. BNPL is a good way to make sound financing decisions.

4. Increased sales and AOV 

Because of the convenience of BNPL services, companies tend to make more sales when they offer BNPL as an option, and the average order value of the sales also goes up. Why? Because now people have the freedom to purchase things that they otherwise would have had to abandon. You might wonder what a good bounce rate is, and how BNPL can make a difference. 

Many people abandon their shopping carts when BNPL isn’t available, so having this option removes a big pain point for shoppers. 48% of responders for a recent survey by said that BNPL allows them to spend at least 10% – 20% more than if they were using a credit card. As you can see, adopting BNPL might be a good solution for your problems.

5. Greater customer loyalty 

Being able to make more purchases from your e-commerce business can lead to greater customer loyalty as people become more familiar with you and amass more positive experiences with your products and your company. They see you as a reliable partner who’s got their back. Along with things like pre-call planning to generate greater sales, offering Buy Now Pay Later services makes it easier for more people to stay with you, and that ease in itself is likely to make people want to buy from you again. 

So, encouraging greater customer loyalty relies on 2 things: 

  • Ease – people like to have an easy time when they’re shopping for anything. 
  • Familiarity – making it easier for people to shop from you helps to create familiarity with your e-commerce business and products, which then is likely to lead to greater customer loyalty.

6. Competitive advantage

A lot of things can give us a competitive advantage in business. Cold calling scripts are a popular choice for e-commerce businesses wanting to garner greater interest in their products, for example. Buy Now Pay Later is another financial tool for getting a leg up over the competition. 

With more and more businesses now offering Buy Now Pay Later options on their e-commerce sites, it makes sense to do the same in order to stay competitive online, along with things like streamlining your team’s efforts for greater productivity. People will often choose the path of least resistance, just like rainfall traveling from mountaintops to the sea will find the easiest way down. 

The easier you make it for people to shop from you, the more likely they’re to do so. And if other companies are making it easier for them to get what they need with BNPL, they might jump ship. So to stay competitive in any market, offering people multiple payment options is very important. Nobody wants to be late in adopting new payment options as it may cost you your e-commerce business.

7. Building trust

Offering Buy Now, Pay Later payments options helps to build trust in 2 ways: 

  • People are likely to feel that they’re being trusted to pay the money they owe, which in itself can foster trust in the business. Being trusted creates trust and generates interest in your products. 
  • Repeated transactions build trust. By offering BNPL, you’re opening the door to more consumers who otherwise wouldn’t be able to afford your product, and as a result, building trust with more people. 

Why is trust important? Well, trust is currency. The more people trust you, the more likely they’re to buy from you repeatedly and to refer other people to your brand. That’s what brands may use for reputation purposes.

Now that the concept of BNPL as a financing mechanism is clear, let’s explore repayment options, pay special attention to the way these payment methods work, and break down the fees involved (if any).

The demand for flexible financing is at an all time high. With lots of payment providers and e-commerce BNPL options available, it might be hard to decide which one you really need. Let’s check out some of the most popular interest-free BNPL solutions on the market today and see why these methods are so appealing to customers.


Affirm Buy Now, Pay Later is a credit line that allows you to shop online at your favorite brands and make payments over a period of 24 months. With no hidden fees and interest rates that start as low as 10%, Affirm is one of the providers that give you the ability to make high-ticket purchases like furniture, home appliances, and electronics without having to pay for them up front. By lending you the money, Affirm’s BNPL gives you the flexibility to pay off your purchases over time, which is especially helpful if you’re saving up for a large purchase or dealing with fluctuating monthly income. 

How does Affirm Buy Now, Pay Later work?

Affirm’s BNPL option allows you to purchase items from major retailers and online stores, and the payments are split up into smaller, more affordable installments. You can select a payment plan that works well for your financial situation. 

You can apply for an account online, and if approved, you can shop and purchase items from a wide variety of retailers. Additionally, you’ll be able to select the maximum amount you’d like to spend, and the retailer will send the items to your house immediately. You’ll be notified about the payment plan for each item you purchase. 

With Affirm BNPL, you can make your payments on time and get the items you need without breaking the bank and any interest involved. In case you’re late with your payment, there are no late fees.


Buy Now, Pay Later with Afterpay is a form of deferred payment where a customer can pay off their items in one, two, three or four installments, depending on the amount of the purchase. The customer may choose to pay monthly, bi-monthly or fortnightly. 

Afterpay calculates your monthly installments based on your order total, the amount you choose to pay up front, and your selected payment frequency. They also use a sliding scale that is based on your personal credit score to determine which monthly payment amount you qualify for.

How does Buy Now Pay Later with Afterpay work?

After you select your items online and add them to your cart on the Afterpay website, you can use them toward your purchase. For example, if you choose an item worth $100, you have to pay $50 as a deposit and the remaining $50 in your next monthly installment. If you choose to pay the full amount after the first month, you have to pay the full $100 at this time. 

Once you make your first payment, you can receive your items. If any of your payments are missed or late, there are no penalties, but Afterpay may take the item back. You can ask for a payment plan review at any time if you find that the monthly payments are too high. 

Afterpay BNPL offers a flexible financing plan that lets a customer tailor their payments to their budget and individual needs. They can pay in full or increase their monthly payment amount at any time. Either way, this provider allows you to shop at the most popular stores and retailers with no interest and establishment fees.

NB! Are you interested in Afterpay? Read our guide on ‘How to Add Afterpay to Shopify’.


Klarna Buy Now, Pay Later is a payment service that enables customers to pay for their purchases over time when shopping at their favorite retailers. This service can be used for purchases made online or in-store, and it provides a payment plan for shoppers who choose to pay for their items in installments, rather than paying the full amount all at once. 

How does Buy Now, Pay Later work with Klarna?

Before you shop with Klarna, make sure you have an active bank account and that you’ve verified your identity by providing a photo ID and proof of address. Once you’ve done so, you can start shopping with Klarna and paying for your purchases over time. 

When you checkout online and select Klarna BNPL as your payment option, you’ll be asked to enter your credit card information. Once your order is verified and approved, Klarna will deposit the amount of your purchase into your bank account. You can then make one monthly payment for your purchases or set up a payment plan to pay off your purchase in installments. Buy now and pay off later!

All Klarna installments are interest-free, but if your payment is 10 days overdue, the company starts to charge late fees – either $7 or 25%. 


Due to its worldwide availability, PayPal is one of the most popular payment providers (along with Stripe). Loved by brands, companies, retailers and consumers alike, they developed their own BNPL feature for their customers.

PayPal’s Buy Now Pay Later feature allows customers to purchase items online and pay later, through a new or existing PayPal account. This feature eases the payment process for customers, as the payment is made through their existing PayPal account. It also makes it easy for customers to manage their payments by allowing them to view their payments, create and track payment schedules, and adjust the amount of payment in the app. 

This feature is primarily designed for customers who have a good payment history and a track record of timely payment with the provider. This makes the PayPal payment terms more flexible, allowing customers to make payments according to their financial situation and available funds. PayPal is also one of the most trusted payment providers on the market which acts as a great selling point for your customers.

How does BNPL with PayPal work?

When using BNPL with PayPal, payments are automatically deducted from your credit or debit card, which means you don’t need to apply for a loan or have a credit check. This also means that you can buy bigger ticket items such as cars, furniture, vacations and more with this financing option. 

You can select how long you’d like to pay for the item and the monthly payment amount, which is typically much lower than the total cost of the item. When you use BNPL with PayPal, you don’t have to make a large upfront payment. You simply make a monthly payment until the purchase is fully paid off. Just split your purchase into several interest-free payments with no set up or late fees. 

NB! Check out our guides on PayPal alternatives and Stripe vs PayPal.


Sezzle BNPL allows consumers to split their purchases into four smaller payments that are spread out over six weeks. This makes it easier to manage their financing, as the consumers don’t need to worry about paying a huge amount of money all at once. 

How does Sezzle Buy Now, Pay Later work?

First, you choose the products you want to buy online. Then, you select the payment plan you’d like to use. Finally, you check out, pay a small deposit and receive your online order. After that you receive a series of payments, with the first payment being due the day after the initial deposit. The rest of the payments will be scheduled for the end of each month. You’ll receive an email at the end of each month, letting you know what payment you need to send. The great thing about Sezzle BNPL is that you can pay off the entire amount at any time. 

The repayment period for Sezzle BNPL is six weeks, and during that time you don’t have to pay any interest on your purchase. However, there’s a one-time service fee of 6.95% of the total purchase amount. If you pay off your full amount early, though, you won’t have to pay any additional fees.

Shop Pay Installments

Shopify, one of the most popular e-commerce platforms, has its own version of BNPL – Shop Pay Installments. At its most basic level, Shopify Shop Pay Installment Plan is similar to a credit card payment plan. Customers can use this payment plan to make a purchase, set up a payment schedule, and make monthly payments to complete the purchase. Shop Pay Installment Plan allows customers to buy what they want on Shopify, when they want it. It also allows e-commerce business owners to sell more and boost their sales.

How does the Shop Pay Installment Plan work?

With Shopify’s Shop Pay Installment Plan, customers can choose to make a one-time purchase or an installment purchase. If a customer chooses to make an installment purchase, they’ll select a product, make their first payment, and then make payments until the purchase is complete.

This BNPL plan allows customers to pay for their purchases in three, six, or twelve-month installments. At the end of each payment period, the payment plan will automatically renew unless the customer cancels it. It’s important to note that each payment is non-refundable.

NB! Are you using Shopify as an e-commerce platform? Read our article on ‘22 Shopify Tips and Tricks: How To Quickly Grow Your Online Store’ to ace your Shopify business.

Check out our guides on how to add Stripe to Shopify and how to do bookkeeping for Shopify.

With this short guide on the most popular BNPL providers, you’ve got an opportunity to weigh the pros and cons of each solution, as well as choose the best option for your e-commerce business.

To sum up

Offering Buy Now, Pay Later payment options opens the door of your e-commerce business to a greater number of customers, whether you’re in the business of fashion, caller ID service providers or other type of software company, or anything in between. People who might not be able to afford the cost of your products up front are now able to pay in installments over the course of a few weeks or months. You get the full payment for your items and the customer gets the item they want in a way that doesn’t break the bank. 

The average value of the sales you make also goes up when you offer BNPL as people are suddenly able to buy more from you in one go. So it’s not just new customers you’re able to attract. You’re now able to make more sales with the existing customers who would have spent less in your store otherwise. Don’t be late in adopting new payment methods!

All of this means that you get fewer abandoned shopping carts, in other words, more orders. Offering flexible payment options like BNPL is attractive for customers who either don’t want to get a credit card, or who are unable to do so. 

And finally, what all of the above results in is a longer customer-business relationship, higher order values and more orders for your e-commerce business. 

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