The pros and cons of buy now, pay later for business

If you sell online and you have noticed more customers hovering at checkout without committing, you already understand the gap BNPL tries to fill. Shoppers want the product now, but they want the cost broken into tidy pieces. Buy Now Pay Later for business turns that last mile of hesitation into a softer landing by extending short term credit right inside your checkout flow. The idea is simple. Your customer pays a small initial amount, takes the item, then completes the purchase through a set of interest free installments. You, the merchant, get a confirmed order and a cleaner path to completed payment. In practice there is more going on beneath the surface, and that is where founders and ecommerce operators need clarity before they add another payment tile to the page.

First, a quick translation of how the pipes work. A BNPL provider sits between your storefront and the shopper. When a buyer selects the installment option, the provider does an instant risk check, approves or declines, and assumes the job of collecting those future payments. The crucial merchant detail is timing. With mainstream providers such as Klarna, funds are typically advanced to the business in full at the time of purchase, while the provider manages repayment and bears much of the fraud and default risk. That is why BNPL can improve cash flow even though the shopper pays over time, and it is also why providers charge more than a standard card transaction.

From the customer side, BNPL’s appeal is not mysterious. It removes the pain of a large single outlay without dragging people into revolving interest. The fixed schedule feels predictable, there is no compounding interest on short plans, and approval criteria can be friendlier than traditional credit lines. This user experience did not just catch on during lockdowns. It trained a cohort of shoppers to expect installments even for mid ticket items, from sneakers to small appliances to skincare refills. Market researchers have framed that momentum with big numbers, including a jump from roughly ninety billion dollars in 2020 to multi trillion projections for 2030. You should always treat forecasts as marketing, yet the directional takeaway is consistent across sources. Installments are not a niche experiment. They have become a mainstream way to pay online.

What does this mean for a brand operator deciding what to enable at checkout. Start with upside, but quantify it correctly. Conversion lift is real when sticker shock is the blocker. So is AOV lift when customers feel safer bundling accessories or stepping up a tier. The proof is strongest in categories with non essential but aspirational items, or where a better model costs meaningfully more than the entry model. Even the providers’ own pages hint at the magnitude. Affirm, for example, markets partner results that include very large average order value uplifts. Treat any vendor claim as directional, not guaranteed, and test on your own traffic mix, but do not ignore the basic pattern. When the barrier is price in a single moment, installments convert attention into action.

The next piece is cash flow. Many operators worry that installments mean waiting months to reconcile revenue. That is not how mainstream BNPL works. With providers like Klarna, Stripe’s Klarna rails, and similar setups, you receive the full purchase price up front, then the provider handles the schedule, the nudges, and the delinquency risk according to its own policies. For finance teams that is a difference maker. You are not turning receivables into a new internal function. You are trading a higher fee for immediate settlement and risk transfer. This is why BNPL can be more than a conversion lever. It can be a working capital stabilizer during launches or seasonal pushes.

There is no free lunch though. BNPL fees are higher than standard card processing and can range broadly. Many merchants see percentages that start where premium card acceptance ends and climb higher, sometimes with a small fixed per transaction component. If you run tight margins, that spread matters. A provider fee between the low single digits and the high single digits can erase the lift if you do not also see either higher volume or meaningfully higher AOV. The only responsible way to evaluate the economics is to isolate cohorts and measure contribution margin before and after BNPL goes live, controlling for seasonality and promo cadence. If you run paid traffic, add blended CAC back into the math to avoid celebrating top line gains that just moved cost around.

Integration is the part nobody likes to talk about in glossy case studies. BNPL is another decision engine inside your checkout. That means new SDKs, routing logic in your PSP or gateway, reconciliation reports your accounting team must ingest, and refund flows that must stay consistent with your return policy. You also need to think about edge cases. What happens when a shopper requests a partial return on an order paid in four installments. What do your agents see inside the provider portal when a chargeback or dispute hits. How fast does the provider settle on weekends and holidays, and does that sync with your finance calendar. None of this is unsolvable, but it is real work. The smoother your payment orchestration layer, the faster you can pilot without breaking your cart.

There is also brand risk. BNPL can create unintended debt habits if customers overuse it, and public sentiment shifts quickly when people feel trapped by fees. Your job is not to moralize, but to make sure your policy and messaging are transparent. Communicate clearly how installments work, when late fees apply, and where to go for help. Lean into categories where BNPL genuinely removes friction rather than pushing it on low income shoppers who might be better served by a smaller basket or a sale next month. The long term health of your customer base is more valuable than a quarter’s lift.

Regulation is the other force reshaping BNPL’s next phase, especially in Europe. The EU’s updated Consumer Credit Directive, adopted in late 2023, brings more installment products into scope and sets concrete dates for national implementation. Member States must transpose the rules into law by November 20, 2025, and apply them starting November 20, 2026. The goal is affordability checks, clearer disclosures, and stronger guardrails so installment offers are transparent and aligned to a consumer’s ability to repay. If you sell into the EU or operate European entities, this does not only touch providers. It affects your advertising, your pre contract information, and your complaints handling loop with the credit intermediary. Prepare now rather than scramble a year from your go live.

If you operate in Australia, North America, or the Gulf, you will encounter different flavors of oversight, but the direction is similar. Payment authorities and central banks are looking at fee transparency, surcharging rules, creditworthiness assessments, and data sharing. Expect more providers to tighten underwriting on higher tickets and to nudge merchants toward clearer copy at checkout. That is good for durable conversion, and it is good for your legal risk. It just means the days of anything goes installment marketing are ending.

So how do you decide if Buy Now Pay Later for business belongs in your stack. Work backward from product, not hype. If your typical cart is under twenty dollars and price is not the blocker, BNPL will not move mountains and the fee will feel heavy. If your core items live between fifty and five hundred dollars and customers often hover because stepping up one model feels risky, installments can be the nudge that pays for itself. If you sell services with delivery spread over time, BNPL can map nicely to your revenue recognition. If you run a replenishment subscription, think carefully. Installments on a subscription can be awkward unless your provider supports it cleanly. Test the experience end to end before you flip the switch for all users.

The next filter is audience. BNPL adoption skews younger, but not exclusively. Gen Z and Millennials respond strongly to predictable installments with no revolving interest. That does not mean older customers will not use it. It does mean your creative and your on site placement should be thoughtful. Put the message near price comparisons and upgrade modules. Show the installment amount clearly, not just the provider badge. Keep the copy short and specific. Clarity converts better than logos.

Pricing and margin come next. Take your current acceptance cost as a baseline and model three scenarios. In the first, assume no change in conversion or AOV and calculate the margin hit from BNPL fee deltas. In the second, assume a realistic AOV lift based on your category and test groups, and see if the spread pays for itself. In the third, fold in expected declines in customer service tickets related to declines or chargebacks if your provider handles more of that surface area. The right decision is rarely yes for all traffic. It is often a targeted rollout to high intent segments, higher ticket SKUs, or seasonal campaigns where extra volume makes the fee worthwhile.

Now think about data. BNPL providers sit on interesting purchase intent signals, but not all of them share useful insights back to merchants. Before you sign, ask what you will actually get. Will you see approval rates by ticket band so you can adjust SKUs. Will you get cohort level repayment performance so you can locate default risk by category and plan length. Will you have a clear line of sight into disputes and late fee exposure that might bleed into your brand sentiment. If a provider promises a dashboard, make them show it on a live screen with realistic sample data.

Risk allocation is another practical layer. Providers generally absorb credit and fraud risk on approved transactions, which is a big part of the value prop. The fine print matters though. Confirm the scope of seller protection, the conditions under which a payout can be clawed back, and how identity verification is handled for higher tickets. If the protection replicates card network chargeback rules with new vocabulary, you want to know that before a peak season, not after. You also want to ensure your customer service team knows where to direct repayment issues. You should not be coaching a shopper on their installment plan. That is the provider’s job.

If you decide to proceed, design the pilot like a product experiment, not a permanent fixture. Gate the feature to a percentage of sessions or to specific product pages. Run it without a discount first so you can measure its raw effect. Watch cart starts and cart completes, but more importantly, watch net contribution after fees and refunds. Inspect return rates. If you see returns spike because people treat installments like try before you buy, the headline conversion lift is not your friend. Keep an eye on settlement timing too. Even with upfront merchant payouts, bank holidays and cutoffs can create reconciliation timing issues if your finance team is closing a month.

Keep your compliance posture tidy while you experiment. Align your BNPL copy with local regulations. Do not promise interest free unless the plan is truly fee free for on time payments. Link to clear terms. Train support to route provider complaints correctly. If you sell into the EU, mark a calendar for the November 2025 and November 2026 dates so your legal and product teams can map any new obligations into your checkout and post purchase flows. You do not want to retrofit disclosures at the last minute across dozens of templates.

One more strategic angle. BNPL providers can be acquisition channels, not just payment methods. Many shoppers discover stores through a provider’s app or directory. If your provider offers featured placement or seasonal campaigns, treat it like any other performance channel. Measure incremental lift. Compare to your paid social or search returns. Do not assume it is free traffic just because it lives inside a payments app. It still costs you through the fee and through potential brand dependence if you lean on it too hard.

Finally, zoom out from quarter to company. BNPL can be a real unlock when it matches price psychology in your category, when your margin can absorb the fee, and when your team can integrate and reconcile without chaos. It can also be a distraction if you are trying to fix deeper funnel problems like slow shipping, poor photography, or confusing bundles. Buy Now Pay Later for business is not a substitute for a strong product story. It is a tool for removing friction when the only thing standing between a shopper and your item is the way the payment hits their wallet today.

If you remember nothing else, remember the three truths that survive the hype. Shoppers like predictable installments because they reduce moment pain and increase perceived control. Merchants can benefit when they trade a higher fee for more completed orders, higher baskets, and upfront settlement. Regulators are closing gaps, which will make BNPL safer for customers and more structured for brands, but also more demanding on your compliance and copy. Use those truths to design a test you can trust, then scale what actually works for your store, not what looks good in a provider deck.