Buy Now Pay Later (BNPL)

Buy Now Pay Later (BNPL)

by Angus Jones

Let’s say you have a customer interested in your product or service, but they don’t have the money this week to buy it.  What can you do? Persuade them to use a credit card, or maybe you should offer a Buy Now Pay Later (BNPL) solution.  The best known of these today are Afterpay, Zip, and Humm. There are many new players, including PayPal, MasterCard and Commonwealth Bank. Although this appears to be free, nothing is ever really free, so let’s discuss. This guide will help you understand and decide if you want to offer Buy Now Pay Later.

In a sense, customers have for years had this option through a credit card. You do not incur a charge as long as you pay the balance off at the end of the month. However, some consumers find it hard to get a credit card or have realised how easy getting themselves into debt is. Thus the buy now pays later explosion has occurred in Australia.  It is a new type of layby where you get the goods immediately rather than waiting for all outstanding money to be paid. The amount that can be financed is usually low compared to other forms of credit.

Buy now pay later works by a 3rd party financer providing credit to a consumer so you, the small business, get paid straight away.  The consumer walks away with the good or service and then must repay in regular instalments. If the consumer does not miss a payment, then they pay no interest. The 3rd party financer makes money from charging you a transaction fee and from charges to the consumer if they fail to pay on time. Note other charges may apply from the financer.

WHY should I offer Buy Now Pay Later (BNPL)?

The benefits for your business:

  • Customer may spend more or make a purchase that may not have happened
  • Customer repurchase rate may be higher
  • You get your money straight away with no fraud risk
  • The process is all automated so there is little paperwork and there is the ability to process refunds

WHAT do you need to know about BNPL fees and charges?

The downside of this method of payment:

  • The % charge per transaction is much higher than an EFTPOS payment (up to 3 x at time of writing)
  • Unlike a credit card, the customer must already have a credit in their buy now pay later account. So for example, if spending $100 must have $25 credit
  • There may be an additional transaction fee per sale
  • If consumers fail to follow the terms of the BNPL provider they may wrongly blame you for additional charges.

HOW do I decide which BNPL vendor?

What you should consider before selecting BNPL vendors:

  • Will you offer more than one solution?
  • Will the solution integrate into your existing POS, accounting, or eCommerce solution?
  • What is the reputation and take-up of each BNPL vendor? Consider the largest vendor will have the most registered consumers
  • Will the available maximum sales amount cover what you are selling?
  • How quickly will you be paid?
  • Is there a per transaction fee?
  • What percentage fee do they charge per transaction?
  • Can you reach additional customers by BNPL supporting your business?
  • What are your competitors doing in the BNPL space?
  • Is there any lock-in contracts?


If what you sell is below $50 in cost or more than $1,000 this might not be the right solution for you.

SUMMARY – Research Buy Now Pay Later (BNPL)

You need to evaluate the different providers and decide if the additional cost of selling is worth the extra business by offering a BNPL solution.

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