How Buy Now Pay Later Grows A Shopify Store

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Malomo Staff


The responsibilities of owning an online store are quite different from the upkeep of a brick-and-mortar shop. From your target audience to operational flow, the differences are vast. Most online ecommerce businesses cater to millennials and Gen Z, who have grown up with online shopping and spend money differently than their predecessors.

To keep up with the growth of ecommerce and capture a share of the acceleration of online spending, meeting consumers, especially young shoppers, at their lifestyle level is becoming more and more vital. To increase overall sales, ecommerce business owners are increasingly offering flexible payment options and alternative payment methods.

If you're a Shopify store owner, how do you do that? Your first option is 'buy now, pay later.’

What is buy now, pay later?

Buy now, pay later (BNPL) is a flexible payment option that addresses point-of-sale financing. Retailers use BNPL firms to offer customers a financing plan for their purchases with no interest rate charged on their payments. With this advantage, the buyers can increase their purchase power right at the moment of the point-of-sale. They can then pay the total cost owed over a period of installments.

With payment options that include interest-free payments and the ease of paying at their convenience, BNPL fosters higher sales and a seamless checkout experience.

How it works

When customers checkout, their orders will still be processed and shipped as normal. The only difference is how they pay: either in full, after thirty days, or in installments over a defined time period.

The BNPL firm works by offering three or four installments with equal spacing. You can pay these installments with your credit card directly, without extra fees or costs, depending on the payment size and time option. As for the merchants who participate, they must typically pay 2-6% commission to the providers in addition to a fixed fee for every transaction. The firm itself handles the payment collection.

This commission means that BNPL may not be cost-effective for small businesses.

Consequences of missed payments

The buy now pays later option is advantageous until you miss a payment. Missing a payment can cause the firm to demand a settlement fee or add a hefty amount of interest to the money you still owe.

Also, remember that you have to pay penalty fees for late payment in addition to the settlement of interest. Another dire consequence of late payment is how poorly it will reflect on your credit report. Your credit score will take a dip.

Buy now pay later vs. credit cards

Surveys show many millennials are somewhat hesitant to use credit cards. They don't own credit and generally are scared of debt. The main advantage of buy now pay later over credit cards is that gaining approval is easier for everyone.

They don't have a lengthy and complicated approval protocol like credit cards and don't require new customers to be subjected to a credit check. The convenience of shopping without filling lengthy applications and avoiding interest payments makes BNPL the better option over credit cards for some purchases. BNPL apps are ideal for smaller shopping purchases like apparel.

If you're hoping to improve your credit score and plan on making big purchases online, then credit cards might be a better choice.

How buy now pay later reduces cart abandonment

The most significant problem for eCommerce businesses comes in the form of reducing cart abandonment. Statistics tell us that customers abandon nearly 88% of the items they add to their virtual carts.

Thus, the BNPL solution comes as an answered prayer for online businesses because it helps reduce cart abandonment by allowing customers to buy the full purchase amount, even if they cannot in one payment.

Here are some of the benefits:

Increased average order value (AOV)

The BNPL solution gives shoppers flexibility of shopping anytime they wish, and they can pay at their convenience. This advantage encourages sales. Not surprisingly, AOV increases correspondingly. Returns are also slowed as well.

Increased consumer power

Customers are ever conscious of the prices when making online purchases. This is why seeing the cost breakdown; the prospect of paying in installations at fair rates with no additional costs empowers them. They can purchase confidently and pay with ease.

Higher customer lifetime value

Customer lifetime value is defined as the entire revenue a shopper will spend in his/her lifetime with that eCommerce business. Hence, BPNL, with its payment flexibility, improves the whole shopping experience of customers, increases repeat purchases, and, ultimately, the customer's lifetime value.

Popular Buy Now Pay Later Firms

Here are the most popular BNPL firms. Nearly all of them partner with Shopify, the gold standard of commerce platforms, and other ecommerce platforms.


Affirm is an exceptional BNPL company, offering installment plans for your unexpected purchases. Hence, if you need car repairs on the spot or something like that with no immediate funds. Affirm offers payment options ranging from six to eighteen months.


A Swedish company, Klarna aims to give you a seamless shopping experience. You can shop from top brands with Klarna, including Finish Line, Sephora, Macy’s, and Adidas. They offer a variety of payment options, but some options charge interest.


Quadpay allows you to shop from your favorite stores and use four-installment payment plans spread across six weeks. There is no harm to your credit score during the instant approval process. No fees and no minimum make it an ideal shopping method.


Afterpay, an Australian-based company, offers you payment plans ranging from three to twelve months. Some plans even offer up to forty-eight months based on terms.

Zip Pay

Zip pay allows you to purchase now and pay over a monthly, weekly or fortnightly plan. The level of flexibility and being interest-free is the advantage you get with this firm.

Paypal Credit

This firm offers you interest-free BNPL with no impact on your credit score. Paypal also offers you credit at a minimum score threshold of 700 for approval.


Sezzle empowers you to make your purchases today while using an interest-free four payments across six weeks type of plan.

Buy now, pay later FAQs

Here are answers to some frequently asked questions regarding BNPL:

Does Klarna work with Shopify?

Yes, Klarna works with Shopify and helps you convert more customers to your store. It gives you upfront payment in full but allows your shoppers to pay at a later date.

What is the Afterpay limit?

At the outset, the limit per transaction that retailers offer on Afterpay is $1,500. After customers demonstrate a consistent record of timely repayment capability, that maximum increases to $2000.

Which is better: Affirm, Klarna, or Afterpay?

Affirm is the current industry leader. It offers short-term lending and allows you to scatter purchases across three to thirty-six months. However, each BNPL has its pros and cons, so it's worth researching them to see what's best for you.

Final thoughts

Buy now pay later is one of the most popular solutions for Shopify stores. It offers multiple benefits for both retailers and consumers alike. From providing the facility of payments in installments while receiving products right away to increasing the customer's lifetime value and driving sales for retailers, this financing solution ensures a win-win situation for all. BNPL highlights the rising importance of ecommerce strategies.

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