Guides

December 30, 2021

Buy Now Pay Later Guide

Carla McMorris
Director of Content

Why More Companies are Integrating Buy Now Pay Later Services

What is Buy Now, Pay Later?

Thousands of retailers today are relying on fintechs to help them boost their average transactions and conversions with modern consumer financing. Buy Now Pay Later (BNPL) or point-of-sale financing are an alternative financing option that allows consumers to purchase goods and services on payment installment plans. With BNPL, consumers spread the cost of a purchase they receive immediately over a set period of time, and as long as they pay each installment on time they usually avoid paying interest.

How does Buy Now, Pay Later work?

Buy Now Pay Later is often an alternative to credit giving shoppers the opportunity to receive the merchandise right away and spread the price of the item across multiple interest-free payments. If they pay each installment on time, they can avoid paying late fees and avoid interest-bearing credit card balances as well. Here’s how BNPL works:

  • A shopper visits several sites to buy a new living room table. She hopes to find one she likes within her $300 budget. 
  • After shopping for a while she finds the perfect table, but it’s $450. She notices the message that she can have the table right now, but pay for it in 4 equal installments so she decides to apply.
  • She clicks the BNPL link, shares her name, birthdate, phone, and email address, and gets an approval notification from the BNPL provider in seconds.
  • At checkout, she clicks the BNPL option and agrees to the payment terms -the purchase is complete.
  • The site that sold the table gets paid the full price immediately minus a fee from the BNPL provider.
  • She continues to pay the installments on time as she agreed to the BNPL provider without late fees or interest.

What’s the benefit of Buy Now, Pay Later to companies?

According to Forbes and Cornerstone Advisors, consumers will make nearly $100 billion in retail purchases using BNPL programs in 2021—up from $24 billion in 2020, and $20 billion in 2019. One of the main reasons that BNPL benefits retailers is the immediate satisfaction that BNPL delivers. Shoppers are more likely to purchase when they know they will receive their goods immediately and it seems to influence their choice of products and even providers. Retailers also enjoy higher sales as shoppers are more likely to purchase the items in their shopping carts instead of abandoning them, and they’re also more likely to purchase higher-priced items. Some retailers have reported double-digit increases in average order value with BNPL services. Additionally, many BNPL providers promote their retailer customers which can also lead to more referral traffic.

How do Buy Now, Pay Later providers make money?

All BNPL providers make a percentage of the transaction amount from the merchant, usually, between 2% and 8%, some charge consumers a flat fee per transaction, and some make additional fees from $5 to $15 for late or missed payments.

Why did Buy Now, Pay Later Services grow so rapidly?

Paying for goods on installment plans isn’t a new concept. It used to be called “layaway plans” with the retailer managing the payments directly with their customers. BNPL advanced the concept significantly, bringing it online, making the service faster and more convenient, and ensuring that more people qualified. Millennials and GenZ are known to avoid credit card interest and have embraced e-commerce, sending the popularity of BNPL growth initially, but it was the online shopping boom during COVID-19 that had the greatest impact on growth. According to Worldpay, BNPL was 2.1%, or $97 billion, of all global e-commerce transactions in 2020 and it’s expected to double by 2024.

How big is the Buy Now, Pay Later industry?

BNPL will reach a $100 billion dollar industry in 2021 with millions of shoppers using BNPL to finance transactions every day. According to eMarketer, more than 45 million people in the US will use BNPL in 2021 which is an 81% increase from 2020, most of them Millennials and Gen Zers. Some of the biggest companies are Affirm, Klarna, Bill Me Later/PayPal, FuturePay, and AfterPay (now owned by Square). Big players like PayPal are launching their own products and purchasing other players like Paidy in Japan, while retailers like Amazon and Apple choose to partner with players like Affirm.

How is Buy Now, Pay Later different from credit cards?

Credit Cards consult your credit history before determining whether they will extend credit, but BNPL services use their own algorithms to determine approval, accepting more people that may have no credit scores or even bad credit scores to qualify for BNPL loans.

What are the risks of Buy Now, Pay Later for consumers?

While most BNPL providers don’t charge interest, there are some that do and they can be high-interest rates. In addition, some are concerned that the ease of use of BNPL could encourage people to spend more than they have and get into debt, not realizing that the installment plans are a type of loan. Many BNPL providers have spending safeguards in place, for example, Klarna has case-by-case spending limits for each customer.

What‘s the future of Buy Now, Pay Later?

BNPL scaled with the growth of eCommerce by younger generations in recent years, especially during the COVID pandemic, which is likely to continue into the future. Additional gains could also come from younger consumers continuing to switch away from their credit cards to BNPL financing as existing players and new major finance players become more mainstream. Some experts believe that BNPL sites will become shopping sites on their own in the future and more BNPL sites may specialize in by-products or industries like home improvement.

Is Buy Now, Pay Later right for your business?

For B2B2C and B2B companies needing to grow sales, ticket price, and sales efficiency, BNPL is a modern solution with proven results. Growing at an ever-faster rate, especially among millennials and Gen Z consumers, BNPL is a viable option over traditional payment methods like debit and credit cards. 


Synapse provides modular building blocks to develop and launch custom suites of financial services to embed banking products, issue cards, provide next-generation loans, and more, quickly, reliably, and securely. Innovative companies use Synapse’s range of payment products to design customized payment services like their own BNPL product to have an impact on revenue, cost efficiency, and customer engagement.


If your business needs support to bridge modern payment solutions between you and your customers, we’re here to help

Buy Now Pay Later Guide

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Carla McMorris
December 30, 2021

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