Running A Business

Want Your Customers to Spend More? Let Them Buy Now Pay Later. 

Feb 10, 2023 • 7 min read
buy now pay later can increase online sales
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      You already know what Buy Now Pay Later (BNPL) is and so do your customers. And if you’ve been waiting around to see if it works, the stats are pretty convincing.

      A late 2022 report published a report from the Consumer Financial Protection Bureau (CFPB) showed that the number of Buy Now Pay Later loans from 2019 to 2021 increased by 970% from $16.8 to $180 million while the GMV, or Gross Merchandise Volume associated with those loans grew 1092% “from $2 billion to $24.2 billion.” 

      If you’re not already offering Buy Now Pay Later, you may be missing out. It has become a huge part of the business-consumer relationship with an estimated 60% of shoppers saying they prefer BNPL over credit cards. The appeal of BNPL for the consumer is clear: get the goods or services today and pay off your purchase automatically over an extended period without interest or a credit check. It’s layaway for a society that hates to wait

      But that’s just 1 side of the BNPL coin (and, yes, consumers can use BNPL on items that could probably be paid with couch-cushion change). What’s the benefit of BNPL for businesses like yours? And could you tap into the allure of BNPL to motivate your customers to spend a little more right now — even if you’re not a retailer?

      What Is Buy Now Pay Later?

      First, an overview: Buy Now Pay Later (BNPL) is a financing option that enables consumers to complete a transaction and get the goods or services now but without needing to pay the full price immediately. 

      BNPL programs allow customers to spread their payments out over time, and often in interest-free installments. A Buy Now Pay Later program is a credit card alternative and can provide consumers with more flexibility to make larger purchases that they may not have had the capital to do otherwise. 

      The average BNPL transaction ranges between $50 and $1,000 and is paid off over 4 equal installments, usually quarterly. The average order value using BNPL was $135 in 2021, which was an 11.5% increase from 2020. 

      Does Buy Now Pay Later Work? Ask Peloton. 

      One of the most popular examples of the power of BNPL is the increase of Peloton purchases using Buy Now Pay Later financing during the COVID pandemic. Instead of paying $1,500 for a new Peloton bike all at once, consumers were offered a BNPL option of 12 interest-free monthly installments at only $125. At one point during 2020, enough consumers purchased Pelotons using Buy Now Pay Later financing that it accounted for 30% of Affirm’s revenue.

      BNPL Advantages for Your Business: Larger Purchases

      When businesses add Buy Now Pay Later options, they may increase the likelihood of larger purchases from customers. How much? Experts at RBC Capital Markets have estimated that BNPL can increase conversions by 20-30% while boosting the order value by 50%.

      Experts at RBC Capital Markets have estimated that Buy Now Pay Later can increase conversions by 20-30% while boosting the order value by 50%.

      What Are the Disadvantages of Adding Buy Now Pay Later?

      Honestly, there’s not a lot of bad in BNPL for businesses, although Buy Now Pay Later providers will charge a business when consumers use it. While credit cards do the same, the typical credit card processing fees range between 1.5 and 3.5%. BNPL merchant fees skew higher—a recent post from Shopify estimates them to be somewhere between 2 and 8% of the purchase amount.

      While that alone could deter your business from adding BNPL, the program may encourage larger purchases, which can offset those added fees. And both Millennials and Gen Z indicate they’d rather purchase with BNPL than with a credit card.

      Besides fees, there is one other risk to businesses choosing to offer Buy Now Pay Later financing: consumers are more likely to overleverage themselves when using BNPL, which could lead to non-payment or default on the loan. But, if you’re using a BNPL provider, they bear this risk. Of course, if you create an in-house BNPL program, that liability falls on you.

      Which Industries Can Use BNPL Financing?

      Buy Now Pay Later programs are not limited to one industry or market—they’re available and used in everything from a local furniture store offering 12 months of interest-free financing to a lumber supplier offering 90-day net payment terms to its manufacturing partner or a plumber or event planner offering clients the option to pay for services in 4 easy online payments.

      The retail industry is the most obvious use case for Buy Now Pay Later programs because it’s conceptually easier to understand a consumer’s relationship with the credit purchase of physical goods. Additionally, the eCommerce checkout process made integrating BNPL solutions seamless. 

      Are those the only industries? No. Almost any business that takes payments online can add a BNPL option. Yes, even B2B suppliers are getting into the act, as Bloomberg noted last summer. 

      Want More Convincing? Interesting Stats About BNPL.

      The BNPL wave was driven by digital solutions like Affirm, Afterpay, Klarna, and Apple Pay Later, which offered online stores an additional value-add to customers through more flexible payment options. As online shopping grows, so does the awareness and use of Buy Now Pay Later.

      C+R Research found that 60% of respondents have already used Buy Now Pay Later with an online purchase. The adoption of BNPL financing isn’t just limited to individual websites; eCommerce platforms like Amazon and Shopify are integrating BNPL options for their sellers.

      C+R Research also looked specifically at the role of the pandemic for BNPL and online shopping. Its findings indicate the massive uptick in online shopping during the pandemic, which also influenced adoption of Buy Now Pay Later financing. The 4 retail sectors it estimates had the largest increase in Buy Now Pay Later were Clothing and Apparel, Electronics, Furniture, and Appliances, which were the 4 most common purchase categories by respondents.

      Buy Now Pay Later Is Just 1 Option for Businesses

      As the saying goes, don’t put all of your eggs in 1 basket. Buy Now Pay Later could be a great   option for boosting your net profit if you take payments online, but it won’t work for every one of your customers. For example, if your target buyer skews more Baby Boom than Gen Z, statistically speaking, BNPL may not change a thing.  

      The solution? Offer plenty of payment options. Credit cards, BNPL, cash, checks, and net-30 (or -60 or -90) options all get the job done. Customers are unique in a lot of ways, including how they’d like to pay you.

      The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of Lendio. Any content provided by our bloggers or authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything. The information provided in this post is not intended to constitute business, legal, tax, or accounting advice and is provided for general informational purposes only. Readers should contact their attorney, business advisor, or tax advisor to obtain advice on any particular matter.
      About the author
      Derek Miller

      Derek Miller is the CMO of Smack Apparel, the content guru at, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy,, and StartupCamp.

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