How Does Buy Now Pay Later Work? BNPL Explained

Buy Now Pay Later (BNPL) is a convenient payment method that allows consumers to spread the cost of their purchases over a specified period. With BNPL, individuals can deposit and pay off the remaining balance in interest-free instalments.

This payment solution is increasingly popular and can be used in various sectors, including fashion, electronics, home goods, and travel. It allows consumers to manage their finances by breaking up large purchases into more manageable payments over time.

When purchasing using BNPL, consumers enter into a repayment agreement with the provider. This agreement outlines the repayment terms, such as the number of instalments, the size of each payment, and the frequency. By spreading the cost, consumers can alleviate the financial burden of making a large upfront payment, making purchases more accessible.

How does it work?

Buy Now Pay Later (BNPL) is a financing option that allows customers to make a purchase and delay full payment. The process typically starts with a soft credit check to determine the customer’s eligibility. Once approved, the customer can choose BNPL as the payment option with a participating retailer or merchant during checkout. The customer then pays a deposit or the first instalment upfront, and the remaining balance is divided into interest-free instalments over a set period.

One of the advantages of BNPL is its flexibility in repayment options. Customers can select the duration and frequency of their payments, depending on the terms provided by the BNPL service provider. Some providers offer weekly, bi-weekly, or monthly payments, making it convenient for customers to manage their finances. In addition to convenience, BNPL can also benefit small businesses as it allows them to offer customers an alternative payment method, potentially boosting their sales and customer satisfaction. However, it’s essential for customers to carefully review the terms, as some BNPL services may charge fees or penalties for late payments or missed instalments.

What Types of BNPL are available

Two options are typically available when buying now and paying later: online and in-store.

Online BNPL services allow customers to purchase through participating online retailers and split the payment into multiple instalments over a set period. These services often offer flexible repayment terms, allowing customers to choose the duration of their payments, typically ranging from a few weeks to several months. This gives consumers the freedom to manage their cash flow and budget accordingly.

In-store BNPL options work similarly but are specifically designed for in-person purchases at participating brick-and-mortar stores. Customers can select their desired items and choose the BNPL option at the point of sale. The purchase price is then divided into equal monthly payments, often interest-free for a promotional period. This lets customers enjoy their purchase immediately while spreading the cost over time.

Both types of BNPL options offer flexibility and convenience for customers, allowing them to make larger purchases and pay over time. Merchants need to choose a BNPL provider that aligns with their business goals and offers favourable repayment terms for customers. By offering these flexible payment options, merchants can attract more customers and increase sales while providing an alternative to traditional forms of credit.

How to set up Buy Now Pay Later.

To set up Buy Now Pay Later (BNPL) options for your business, you have two main choices: in-store setups or online setups. Each option comes with its benefits and requirements.

For in-store setups, merchants can partner with BNPL service providers and integrate their solutions into their point-of-sale systems. This allows customers to apply for BNPL at the checkout counter and make purchases immediately. To set up in-store BNPL, merchants need to meet the application requirements of the service provider, including credit checks and approval processes.

Online setups for BNPL are also popular, especially for e-commerce businesses. Merchants can integrate BNPL options into their online platforms through plugins or APIs. This allows customers to select BNPL as a payment option during checkout. The setup process typically involves creating an account with a BNPL service provider and integrating their payment solution into your website or mobile app.

To apply for BNPL, customers must meet certain requirements, such as having a credit card and a good credit history. The approval process may involve soft credit checks and assessing the customer’s ability to make timely payments.

Setting up BNPL can be a valuable addition to your business, providing flexible and convenient payment options for your customers and potentially boosting your sales.

What are the best BNPL companies?

Buy Now Pay Later (BNPL) services have gained popularity recently, providing customers with an alternative payment method to split their purchases into manageable instalments. There are several top BNPL companies in the UK, each offering unique features and flexible repayment options.

One of the largest and most well-known BNPL providers is Klarna. Klarna allows customers to shop from a wide range of online retailers and split their payments into four equal instalments, with the first payment made at the time of purchase. Klarna also offers a “Pay later in 30 days” option, where customers can delay their payment without interest or fees.

Another prominent BNPL company in the UK is Clearpay. Clearpay allows customers to divide their purchases into four interest-free payments due every two weeks. This allows customers to budget their payments according to their financial situation.

Laybuy is another popular BNPL provider in the UK. It allows customers to split their purchase into three equal instalments, with the first payment made at the time of purchase. Laybuy also provides a digital wallet feature, allowing customers to store and manage their BNPL payments in one place.

Compare Klarna, Clearpay and Laybuy

Other well-regarded BNPL services in the UK include Laybuy, Payl8r, and Openpay. Laybuy allows customers to split their purchases into six equal weekly payments, while Payl8r offers longer repayment terms, ranging from three to twelve months. Openpay allows customers to spread their payments over a shorter period, typically two to five months.

These top BNPL companies provide convenience and flexibility for consumers, giving them options to make purchases without paying the full amount upfront. Customers must compare each provider’s features and repayment options to determine which best suits their needs and financial situation.