What Is Buy Now Pay Later?

With the rise in popularity of this unique payment option, it’s not surprising to see that so many business owners are asking, “What is BNPL?”

BNPL, or buy now pay later, is a financing option that has become overwhelmingly popular, specifically among consumers aged 18 to 44. These options allow your customers a way to purchase your products and services now and pay for them in installments over time. 

According to CNBC, you can expect the addition of BNPL solutions to your checkout process to drive a 20% to 30% increase in conversions. But how does BNPL work, and should you add the option to your checkout process? 

How Buy Now Pay Later Works

One of the biggest questions business owners ask about this unique payment method is, “How does BNPL work?” After all, this is a relatively new form of payment, and as a business owner, you deserve to know the inner workings of the process. 

The good news is that BNPL systems are relatively easy to incorporate and understand. Here’s the breakdown of exactly how BNPL works:

Customer Begins Checkout Process Like Normal

Buy Now Pay Later

The BNPL process starts like any other shopping experience. Your customer visits your website or brick-and-mortar store and chooses the products or services they’re interested in buying. Once the customer decides what they want to buy, they begin the checkout process as normal. 

This could be in a store with a cart full of goods or online in a digital checkout environment.  

BNPL Is Offered as a Payment Method on Checkout Screen

When it’s time to check out, your customers typically have multiple options. Some of the most popular options are credit and debit cards, PayPal, and bank transfers. However, you can add the BNPL payment plan option to your checkout screen as well. 

These options typically show up on the screen as “Buy Now Pay Later” with the number of installments and values of monthly payments beside them. For example, a customer may want to purchase an item worth $400. On the checkout screen, they may see the option to pay in four installments of $102, the value of the items plus a small convenience fee when all four monthly payments are added up. 

Customer (Sometimes) Receives a Soft Credit Check


BNPL services are short-term lenders. They pay the business at the time of purchase and collect their payments over time. Many of these companies look into the customer’s payment history and credit score before offering short-term loans. This typically happens via soft credit inquiries.

However, providers like Gratify Pay make it easier for your customers to make purchases because they don’t have to worry about credit checks. 

Retailer Pays a Small Fee to the BNPL Provider

When retailers add BNPL solutions to their checkout pages, they can expect to see a meaningful increase in conversion rates, but these services aren’t free. In most cases, BNPL providers charge merchants a small convenience fee. 

BNPL services are their own companies that have the freedom to charge whatever they’d like for their services. So, the convenience fee from one provider to the next might be significantly different. 

Nonetheless, most quality providers charge merchants between 4% and 6% of the total value of the transaction. 

Customers Pay Off Their Purchase in Installment Payments

When your customers place their BNPL orders, the order is processed immediately. That means their products are prepared for shipment as if they had paid with a traditional payment method. 

From there, the customer pays as agreed on the payment dates. However, as the merchant, you don’t take any risk from the payments. Instead, the risk of nonpayment falls on the shoulders of the BNPL provider. 

Retailer Is Paid Upfront for Transaction

As mentioned above, you don’t take any risk when you provide monthly payment plans through BNPL services. Instead, the BNPL provider takes on the risk of the payments. 

When a customer purchases a product or service from your business under a BNPL plan, the plan provider pays you upfront for the total value of the transaction minus any fees you’re expected to pay as a merchant. 

So, the process for the merchant works just like charging a credit card. You get paid your transaction value minus fees, and the lender accepts the risk. 

How BNPL Differs Online vs In-Store

Whether you sell online, in-store, or even through invoices, buy now pay later options are a convenient way to increase your conversions. 

The process for buy now pay later online is similar to the process for buy now pay later in-store. The only real difference is that when you use this option in the store environment, it’s important for checkout staff to let the customer know it exists. 

The Advantages of Offering BNPL as a Form of Payment

There are several advantages to offering BNPL services to your customers. Some of the most important ones include:

  • Customer satisfaction. You can make your visitors happier, one customer at a time, by offering BNPL services. After all, these services make it easier for your customers to afford the products and services they want. 
  • Help customers avoid credit card debt. Customers are more apprehensive about using credit cards than they are about using BNPL services. 
  • Increase conversions. Getting your customers to add items to their carts is only half the battle. The other half is getting them to pay. BNPL options make it less financially painful for your customers to buy from you, ultimately increasing conversion rates

Why Gratify Pay Is the Right BNPL Option for Your Store

When you offer your customers installment plans, you can expect to see growth in conversions — it’s as simple as that. But you have to be careful. Many BNPL services are data aggregators that will try to sell your client data to your competitors. 

Gratify Pay is different — we’re interested in helping you build your brand without requiring you to share your customer data with competitors. 

Moreover, with Gratify Pay, you can sell online, in-store, or on an invoice, with biweekly or monthly installments for products and services up to $10,000. Get started today to see how Gratify Pay can help your business grow. 

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