Buy Now, Pay Later: Fueling Online Cart Conversions

Online shoppers today want more than just fast shipping and a sleek checkout—they want flexible ways to pay. That’s where Buy Now, Pay Later (BNPL) steps in. It lets people who are shopping online split purchases into smaller, interest-free payments.

This payment option has taken off, especially with millennials and Gen Z, who prefer breaking up payments over swiping credit cards. That means for online stores, it’s no longer just a nice extra—it’s a smart way to boost sales.

Thinking of offering BNPL at checkout? Not sure if it’s worth it? Read on as we break down:

What BNPL actually is (and how it compares to credit cards)
Why e-commerce businesses are quickly adopting BNPL
The risks you should know before jumping in
Best practices for integrating BNPL into your store
Where BNPL is headed next

At the end of this article, you’ll understand how to use Buy Now, Pay Later to drive smarter, more flexible e-commerce growth.

What is Buy Now, Pay Later (BNPL)?

As mentioned above, Buy Now, Pay Later is a digital payment option that lets customers split their purchases into smaller, interest-free installments, usually over a few weeks or months. It’s designed to make checkout feel lighter without needing a credit card or upfront cash.

Some of the biggest names in the space include Klarna, Afterpay, and PayPal Pay Later. These providers partner with online stores to show flexible payment options right at checkout, often with just a few clicks.

The key difference between BNPL and credit cards is how interest works. With a credit card, if you don’t pay your full balance by the due date, you’re charged interest on what’s left. For example, if you buy something for $100 and only pay $50, you’ll likely pay interest on the remaining $50.

With BNPL, the $100 is divided into equal payments—say, four $25 installments. As long as you pay each installment on time, you won’t be charged any interest at all. If you miss a payment, you might get a late fee, but you still won’t owe interest on the original amount.

Additionally, there are no annual fees, and approvals are typically faster, with soft credit checks or none at all. This makes it more accessible, especially for younger shoppers or those who don’t want to use traditional credit.

Why e-commerce businesses are embracing BNPL

Why does BNPL help e-commerce businesses, even when shoppers don’t always pay on time? Well, one thing you need to know is that the provider of the BNPL service, not the store, takes on the payment risk. That means even if a customer pays late, the store still gets paid upfront.

Here are a few more reasons to add BNPL to the checkout page:

It increases average order value (AOV): Shoppers are more likely to buy higher-priced items or add extras to their cart when they know they can split the total into smaller payments. A $200 cart feels more doable as four $50 payments.
It reduces cart abandonment: Price hesitation is one of the top reasons people leave without buying. BNPL helps remove that barrier by making the cost feel more manageable.
It attracts younger, budget-conscious shoppers: As mentioned above, millennials and Gen Z are less likely to own credit cards and more likely to avoid debt. BNPL appeals to them because it offers payment flexibility without interest or annual fees. It also feels modern and easy to use, with most approvals happening in seconds during checkout. Offering BNPL helps stores stay relevant to this fast-growing, highly digital audience.

Take Afterpay, for example. Brands that added Afterpay saw conversion rates increase by 35% and new customers grow by 50%. Additionally, during Black Friday, some retailers even recorded a 121% sales boost year-over-year; proof that flexible payments directly drive spending.

For e-commerce businesses, it’s not just about offering more options. It’s about meeting customer expectations and removing customer friction to purchase.

Risks and challenges for retailers

Buy Now, Pay Later can boost sales, but it also comes with challenges that businesses can’t ignore.

Higher transaction fees: BNPL providers typically charge retailers between 2% to 8% per transaction, higher than credit cards or other payment methods. For brands with tight margins, this can eat into profits fast.
Increased return rates from impulse buying: The convenience of splitting payments often leads shoppers to buy things they normally wouldn’t. But this can backfire, especially in fashion or beauty, where return rates are already high. More returns mean higher shipping costs and added operational strain.
Dependence on third-party providers: Retailers rely heavily on BNPL providers to handle payments and approvals. Any changes in provider fees, policies, or technical issues are out of the retailer’s control, but directly affect the checkout experience of their customers, which isn’t always positive.
Integration challenges for smaller businesses: Adding BNPL isn’t always plug-and-play. It can require time, tech resources, and operational adjustments, which might not be easy for smaller e-commerce brands.
Regulatory risks and changing compliance rules: BNPL’s rapid growth has caught the attention of regulators. In the UK and Europe, for instance, new rules are forcing providers to run affordability checks and enforce spending caps to prevent consumers from borrowing beyond their means. Retailers working with BNPL providers will need to stay on top of these changes to avoid disruptions.

Best practices for integrating BNPL into your online store

BNPL comes with risks, but when done right, it can still be a powerful growth tool. Here’s how to integrate BNPL in the best way possible:

Choose a provider based on fees, UX, and market: Not all BNPL providers charge the same fees or offer the same customer experience. Compare their transaction rates, approval process, and coverage based on where your customers are.
Make BNPL options visible early in the buyer journey: Don’t just drop BNPL at checkout. Mention it on product pages, category pages, or even in paid ads. The sooner customers know they can split payments, the more likely they are to buy.
Use clear messaging about payment terms: Show exactly what customers are committing to. Example: "$50 today, then 3 monthly payments of $50. No interest, no hidden fees." If there are late fees, say it upfront: "Late payments may result in a $10 fee." Clear information builds trust and reduces complaints.
Test placement and language: Test if adding BNPL details right under the price drives more clicks. Example: "Or 4 payments of $50 with Afterpay." You can also try different CTAs like "Split payment available" vs "Only $50 today." Even button placement can affect conversion rates; try them all to see where BNPL converts best.

The future of Buy Now, Pay Later in e-commerce

As BNPL continues to be used by various companies, don’t be surprised if becomes more than just an easier way to pay. Here’s how BNPL is expected to help businesses sell more in the coming years:

More industries adopting BNPL = less hesitation to buy: As BNPL becomes available in travel, healthcare, education, and services, shoppers will grow more comfortable using it everywhere, reducing doubt and making big-ticket spending feel normal.
More flexible payment terms = easier to sell higher-priced items: Longer installment plans aren’t new, but expect BNPL providers to offer even more options for big-ticket purchases, like lower monthly payments or custom plans based on cart size. This gives businesses more ways to remove price hesitation and push higher cart values.
Rewards and loyalty perks = more repeat purchases: BNPL providers are adding cashback, discounts, and membership perks to encourage shoppers to keep coming back and using BNPL more often.
AI-powered personalization = fewer abandoned carts: Smarter BNPL tools will offer tailored payment plans based on customer history — like smaller upfront payments for loyal shoppers — helping remove final barriers at checkout.
Sustainability features = appealing to values-driven buyers: Eco-friendly options like carbon offsets may nudge environmentally conscious shoppers to complete their purchases instead of hesitating.
Global expansion = access to new customers: BNPL is entering emerging markets where credit access is limited, giving brands new sales opportunities with shoppers eager for flexible payments.

Conclusion

For retailers, BNPL offers real opportunities to drive growth, reach new customers, and increase sales. But success won’t just come from offering it; it will come from offering it well. Clear terms, responsible messaging, and transparency will be what separates trusted brands from those that lose customer confidence.

Those who get it right now won’t just be keeping up. They’ll be leading the way. Will you be one of them?