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How does buy now, pay later work for merchants?

The short answer is that buy now, pay later (BNPL) works very well for merchants.

In recent years BNPL has exploded in popularity among shoppers so much that it's now a must-have for most e-commerce businesses. If your business doesn't offer a BNPL option, roughly half of shoppers say they’ll take their business elsewhere.

See below for a more complete picture of how buy now, pay later works—and why it can benefit your business. 

Setting up buy now, pay later online

Depending on your e-commerce platform, offering a pay-over-time option to customers could be as simple as a few clicks. Most BNPL providers, including Affirm, have plug-ins with several major platform providers. Or you can integrate the provider's technology into your system with little dev work, in most cases.

After the tech integration is complete, the partnership with your BNPL provider will work like your arrangements with credit card networks. Here’s what you can expect:

  • Shoppers on your site will see an icon for making a BNPL purchase—alongside icons for other payment options—at checkout. 

  • If they select this payment option, the approval process takes seconds after shoppers provide a few pieces of info to the BNPL provider.

  • The purchases from eligible shoppers will be processed—and funds collected—by the BNPL provider, similar to credit card transactions. 

  • You receive full payment within hours after the purchase, minus the processing fee you agreed to as part of the partnership.

The immediate result for you is a frictionless checkout process that appeals to shoppers who want to avoid credit cards. That’s because the payment terms with BNPL are clearly laid out before shoppers ever click “buy." They know exactly what they’ll pay and when.

Your protection against shopping cart abandonment

Offering a pay-over-time option to your customers can combat the top reason shoppers abandon their shopping carts. Sometimes the total price—with shipping costs and taxes—can induce “sticker shock" that’s a barrier to buying. But seeing the option to pay over time can give shoppers more flexibility to fit the purchase into their budget.

Offering a pay-over-time option like Affirm to shoppers can also pull sales forward, resulting in incremental e-commerce revenue gains. In a recent study of Affirm users, 29% said they would not have completed the purchase if Affirm wasn't available. And nearly half (45%) would have delayed the purchase.

How buy now, pay later drives higher conversion

When you give customers a BNPL option, you can unlock some powerful benefits for your business, like accelerating conversion by 30% and increasing cart sizes up to 50%.

Most BNPL providers offer a common pay-in-4 plan that's interest-free, and customers who choose it pay off their purchases in as little as 6 weeks. The transparency of the process appeals to many of them, and the quick repayment period can accelerate repeat purchase activity for many satisfied customers.

The benefits to your business will also vary with each provider. Affirm, for example, has an active user base of over 11 million shoppers who can discover your business through our shopping app. Our BNPL solutions also offer more variety than the common pay-in-4 plan so that you can capture more sales at a wider range of cart sizes.

Overall, the future of buy now, pay later looks very bright. As you consider adding it to your checkout, these 5 questions can help you evaluate which BNPL provider is right for your business.

Get our free ebook that covers even more ways that offering buy now, pay later to your customers can pay off for your business.