Should Your Business Offer Buy Now, Pay Later (BNPL)? Risks and Rewards

Today’s shoppers want flexibility and Buy Now, Pay Later is emerging as their preferred way to pay. Rather than paying the sticker price up front, customers can divide their purchase into a few, smaller, interest-free installments, that makes expensive products feel more affordable and attainable. BNPL which was long offered by big retailers is increasingly being offered by small-to-medium sized businesses trying to compete, drive sales or attract younger shoppers.

But while the appeal is obvious — more conversions, higher cart values, faster checkouts — Buy Now, Pay Later also comes with financial and operational risks. Whether with late payments or enhanced returns, you’ll want to consider both sides of the equation before taking the plunge.

This guide will help you navigate the good, the bad and the smart in potential BNPL offerings for your business.

What Is BNPL and How Does It Work?

Buy Now, Pay Later is a short-term financing that enables consumers to break their purchases into manageable payments—typically with zero interest if on time. It has emerged as an alternative to credit cards, particularly among the younger, cost-conscious set that prefers flexibility over revolving debt.

Here’s how Buy Now, Pay Later generally works: At the point of purchase — online or in person — the consumer chooses BNPL option from providers like Afterpay, Klarna, Affirm. The BNPL provider then pays the full amount (usually within seconds) to the merchant in full, minus a modest processing fee. The provider is then reimbursed by the customer with regular payments, generally over 4 to 6 weeks.

This model benefits both sides. Consumer gets immediate use of the product without having to instantly pay for everything; the business get paid for the in full and upfront without having to worry about chasing collections.

Buy Now, Pay Later is particularly prevalent in fashion, beauty, electronics, home décor and personal services sectors. Providing BNPL through your payment processors can drive average order values, reduce cart abandonment, and boost customer satisfaction for merchants in these industries.

But before you offer it, it’s essential to understand the full picture—including the interchange fees, obligations, and customer experience implications.

The Benefits of Offering BNPL to Your Customers

It’s not just a trend to add Buy Now, Pay Later (BNPL) to your checkout flow — it can be an incredible business booster. BNPL also enhances customer satisfaction and revenue for many start-ups and small businesses.

• Improved Conversions: A major advantage of Buy Now, Pay Later is reduced cart abandonment. When consumers realize they can break a $100 purchase into four $25 instalments, the decision gets easier. This flexibility can be the difference between “maybe next time” and “checkout now.”
• Higher Order Values: Consumers spend more when buying in a Buy Now, Pay Later manner. That’s because paying all at once doesn’t have the same pinch, so customers are more apt to get that extra purchase.
• Broad Customer Base: BNPL has become very popular with younger consumers (Gen Z and Millennials) who don’t like credit cards or don’t have them and don’t have traditional credit. For this new wave of buyers, especially those shopping on mobile, the BNPL feature opens up your brand.
• Superior User Experience: This is convenient, fast and seamless – no drawn out credit applications or time-consuming procedures are required. The frictionless nature of this tech-forward experience can even elevate your overall brand perception.
• No Credit Card Required: BNPL is a way to gain access to consumers who are not card holders or who don’t want to use their card. It is particularly useful to customers who are dependent on debit or prepaid options.

In the end, BNPL meets customers where they are—financially and digitally—and helps you grow fast.

The Business-Side Rewards of BNPL

From the merchant point of view, Buy Now, Pay Later (BNPL) is not only about offering customers additional flexibility, but it also provides a competitive edge that delivers additional revenue without additional risk.

• Get Paid Upfront: With Buy Now, Pay Later, you don’t have to wait, wondering if you will get paid in installments. The BNPL provider pays you the complete transaction value upfront (less a service fee), so your cash flow isn’t compromised even if customers pay for their purchases in installments.
• Zero Collections Risk: Unlike traditional layaways or in-house payment plans, BNPL options transfer the risk of repayment to the merchant. If a customer defaults on a payment, it’s the provider — not your business — that does collections and follow-up.
• Higher Retention: A frictionless BNPL experience can convert one-time purchasers into repeat ones. Because when buyers feel liberated, unburdened by large upfront fees, they are more likely to come back — especially for big-ticket items or recurring purchases.
• Competitive Edge: As a growing number of major retailers offer flexible payment options, BNPL help equalize the playing field. Providing Buy Now, Pay Later communicates to holiday shoppers that you’re a modern and customer-friendly retailer that knows how to compete.
• Powered by Mobile Sales: BNPL is particularly popular on mobile devices, given the convenience factor. Mobile-friendly BNPL checkout: One-tap approvals, simple integration, and BNPL is Talking directly to the higher conversion rates from your app or mobile site.

Is BNPL Right for Your Business?

Buy Now, Pay Later can revolutionize your spending — but it’s not a one-size-fits-all solution. But before you take the plunge, think carefully about how BNPL meshes with your products, margins and audience.

• Product Type: BNPL works well for mid-high ticket. If you are selling $15 accessories, the customer might not need an installment plan. But for products above $100, Buy Now, Pay Later can help remove friction at checkout.
• Margins: BNPL players normally demand higher than standard credit card processors’ rates (often 4 – 6%). You should ensure your profit margins are high enough to not be stung by these costs.
• Audience: BNPL is most popular with increasingly influential younger mobile-first shoppers who crave flexibility. If your target customers are those who prioritize convenience and budgeting, BNPL may provide growth.
• Volume of Sales: For extremely low volume businesses, the setup may not be worth the return. On the other hand, popular eCommerce stores tend to perform well.

Pro Tip: Start small. Pick a single Buy Now, Pay Later provider, turn it on for a few products, and then be sure to test results over 3–6 months before fully scaling.

Best Practices for a Successful BNPL Rollout

Once you decide to introduce Buy Now, Pay Later, the implementation is just as important as the decision. This type of thoughtful rollout can help increase adoption and prevent confusion.

• Promote It Clearly: Call out the options on product details pages, in-cart views, email marketing, and checkout screens. They don’t use what they don’t see.”
• Transparency Is Key: Explain clearly what the terms are — whether it’s interest-free, the number of installments, any fees involved.” This creates trust and decreases post-purchase shock.
• Educate Your Team: Ensure that your customer service and sales teams are on board with how BNPL works, particularly regarding returns, refunds, and troubleshooting.
• Track Key Metrics: Pay attention to the impact of BNPL on average order value (AOV), cart abandonment, refund rates and overall conversion. And these insights can help you determine if it really is working.
• Gather Feedback: Ask customers how they found the experience after you have rolled it out. Did BNPL influence their decision? Was it easy to use? Further optimizations will be based on their input.

Conclusion

A smooth BNPL launch can contribute to higher customer satisfaction and also help improve your bottom line. One thing to keep in mind — how you present it, and support it, is just as important as giving it.

Buy Now, Pay Later is more than just a trendy checkout option—it’s a shift in how consumers shop. When done right, it can drive higher conversions, lift average order values, and help your brand connect with younger, budget-conscious customers.

But it’s not without its trade-offs. Higher fees, potential customer overuse, and reliance on third-party providers mean you need to approach BNPL with strategy. Understand your audience, know your margins, and pick a provider that aligns with your business goals.

Buy Now, Pay Later can absolutely fuel smarter growth—but only if it fits your model. The most successful businesses treat BNPL as a tool, not a shortcut. Regularly review whether your BNPL partner is improving sales and enhancing the customer experience.

In short: Buy Now, Pay Later works when it works for you. Choose wisely, and your flexibility will pay off.

Frequently Asked Questions

1. Is Buy Now, Pay Later safe for my customers?

Yes it is generally safe when offered through trusted providers like Afterpay, Klarna, or PayPal. These companies run soft credit checks (or none at all) and clearly disclose terms. Still, it’s smart to remind customers to read repayment terms.

2. Does Buy Now, Pay Later affect my business’s credit or finances?

No. Since the BNPL provider pays you upfront, your cash flow isn’t delayed. However, you’ll pay a higher processing fee (usually 4–6%) compared to traditional card payments.

3. Can I offer Buy Now, Pay Later in-store and online?

Absolutely. Most providers offer solutions for both physical and digital checkout. Just check which providers support your POS system.

4. What happens if a customer misses a payment?

You’re not liable. The BNPL provider handles collections and customer communication. Your payment is guaranteed as long as the transaction clears initially.

5. Do I need to offer BNPL on every product?

No. Many businesses offer it only on higher-priced items or during promotions. You can customize where and when Buy Now, Pay Later appears in your store or website.