As eCommerce booms with a growth rate poised to top 20% this year according to IBM’s U.S. Retail Index, vendors and marketplaces are trying to draw customers with a shopping experience with an extra payment feature that will help make it very easy to pay for their loaded shopping carts1.

The BNPL field is dominated by a few major players – Afterpay, Affirm, Klarna, QuadPay, Sezzle, Splitit, and most recently, PayPal Credit (formerly BillMeLater). As a payment gateway service that most merchants already offer, PayPal clearly has, despite its late entrance into the game, a natural advantage. Part of PayPal’s suite of pay later products, Pay in 4, is available to consumers who are making purchases between US$30 and US$600. Major brands such as CVS, Revolve, Nike, Levi’s, Urban Outfitters, Expedia, are offering these services on their eCommerce channels.

While the buy now, pay later (BNPL) model has been around for some time, this year it has gotten a particular boost. Splitit saw record growth of 176% quarter-over-quarter and 260% year-on-year during Q2 of 2020 while Afterpay had boosted its active US customer base from 1.9million to 5.6million within a year, an increase of 219%2,3

The BNPL phenomenon has its roots in credit cards and financing schemes of yore such as layaway. However, unlike its predecessors, as a modern one-click payment option, it feels like a win-win for both the customer and retailer. 

Popping up at checkout, the BNPL model allows customers to finance smaller ticket items with either no payment or just a small starting one and to pay the rest at a later date in a few installments, at either low or no interest rates. 1 in 3 US consumers have used a BNPL service while in the UK, 67% of UK millennials have used a BNPL service, according to research from management consultancy Kearney4,5. Retailers, on the other hand, have no risk as the BNPL provider takes it on in case of default. For this privilege, sellers pay a few cents per transaction as well as 2-6% of transaction value, which is more expensive than fees that credit card companies charge.

Innovations in technology such as artificial intelligence and machine learning have made it possible for financial institutions to reduce the risk of fraud and defaults, and their clients benefit from this as they now have an understanding of the buyer’s credit profile without affecting their credit scores.  

Customer demographic skews younger and has access to a range of financing

A report on on the BNPL industry showed that 87% of shoppers interested in the services were between the ages of 22 and 446

Consumers, especially the millennials and Gen Z among them, are also wary about the debt that comes with using credit cards. In the uncertain economic climate, customers are more inclined to take on more debt. However, issuers are lowering limits or closing cards altogether7. With uncertainty about the future on the minds of a lot of people, BPNL services stand to benefit from the sentiment. 

Credit cards, in any case, are just one of a range of credit tools available to young people.

Respondents said they use BNPL to buy electronics (43.65 percent), clothing or fashion items (36.95 percent), furniture or appliances (32.81 percent), household essentials (30.96 percent) and groceries (22.54 percent).

Benefits to customers

Customers have the option of buying items and paying for them with flexible terms ranging from 3 months to multiple years, depending on the provider, improving the customer experience and making it frictionless. They can receive their item before completing a full payment. The payments are interest free and sign-up is much faster than for credit cards.

Nearly 42 percent of BPNL users cite clarity of terms as a key priority when making purchases online, and 39.1 percent the ability to monitor spending8.

Benefits to retailers

The BPNL model is being used by retailers for high value goods or by those offering low value goods but want to increase conversions, cart size, reach new customers and keep existing ones. Payment provider Stripe – a QuadPay partner – says it is not a good fit for businesses selling services or software or those sensitive to cost, since fees are higher9.

  • Increased sales value Providers such as Klarna claim that the addition of a BPNL feature led to an increase of 33% in the value of sales at its client GymShark. QuadPay says merchants that have implemented its BNPL product for e-commerce have seen a 20 percent increase in conversions and 60 percent increased average checkout value10.  It is a way to ensure revenue without resorting to tactics such as discounting. 
  • New customers A BPNL option might attract customers who were previously hesitant to buy products because the price was out of their budget. Lifestyle brand BlackCool says its sales rocketed 600 percent after it launched its BNPL plans. Its CEO claims that it brought in “different demographics, including price-conscious consumers who may think our premium products are priced beyond their reach”11. The providers, with their own community, will expose a store’s products and brand to millions of potential customers.
  • Loyalty Customers who know this option is available on an eCommerce store, and like the seamless nature of the customer experience, are more likely to return for repeat purchases.

Retailers will however need to think about how they will be sharing the customer relationship with the BPNL provider.


The greatest challenge to BNPL adoption used to be the fact that the direct integration into the retailer’s point-of-sale system is an onerous process. BPNL services are, however, increasing their integrations with existing eCommerce systems such as BigCommerce, Shopify Plus and Salesforce Commerce Cloud to make it as easy as a flick of a switch.

Drawbacks for customers

While the soft credit checks the BNPL providers run at purchase do not impact customers’ credit scores, late payments can. Customers who default may be banned from further purchases. The terms and conditions from the BPNL service providers are not necessarily clear at sign-up either, leading to unexpected fees.

The future of buy now, pay later

As the use of frictionless, contactless experiences, and mobile wallets at the checkout in retail settings increase, the uptake of BNPL should follow suit. BNPL payment methods went from 3% of all eCommerce payments in 2018 to 8% in 2019, according to the Global Payments Report 2020 by Worldpay from FIS12. Customers are steadily being offered BNPL services outside eCommerce as well to pay for purchases, and they will possibly one day become as ubiquitous as credit card payments.



1. COVID-19 pandemic accelerated shift to e-commerce by 5 years, new report says, TechCrunch, 24 August 2020.

2. As COVID-19 Continues to Fuel E-commerce, Buy Now, Pay Later Programs Evolve, WWD, 14 July 2020.

3.  Afterpay investor presentation, Afterpay, 07 July 2020,

4. Buy Now, Pay Later Services Growing Quickly Among U.S. Consumers, 20 July 2020,

5. Credit uncrunched: why banks and retailers must develop more PoS credit services, Kearney, Jan 2020,

6.  How BPNL Services bring value to small businesses,, Apr-Mar 2020,

7.  How Covid boosted popularity of buy now, pay later options, 4 Sep 2020,

8.  Millennials, Buy Now Pay Later And The Shifting Dynamics Of Online Credit,, 10 Dec 2020,

9.  Stripe, Buy now pay later – Learn about buy now pay later methods with Stripe,

10.  Changing the Game: The Rise of the Buy Now Pay Later Consumer,, 3 Nov 2020

11.  How BNPL Helps Bring Consumers Into Stores, Pymnts, 23 July 2020,

12.  Global Payments Report 2020, Worldpay,