The Good, the Bad, and the Ugly: Buy Now, Pay Later (Insights Magazine, July 2021)02nd August 2021
Buy now, pay later (BNPL) is one of the fastest-growing payment types around the globe. Often considered an alternative to traditional credit, BNPL seems attractive on the surface, but adopting BNPL requires investigation on a case-by-case basis.
In this article, we define and explore some of the considerations a merchant should address when exploring BNPL. These include trends in BNPL growth, regional insights, regulations around the globe, impact on other payment types and commercial considerations.
What is Buy Now, Pay Later?
There are typically three types of BNPL: installment plans, “pay later” or deferred payments, and pay on finance (see Figure 1 video below).
All three models charge transaction fees to merchants. While the fees vary by provider and model, they are far higher on average than credit card or debit card fees, making BNPL one of the most expensive payment types. Under one provider’s rates, U.S. merchants pay a fixed fee of 30 cents per transaction regardless of the type of BNPL plus about 3% of the transaction for the finance model and about 6% for the pay later or installment models. By contrast, the fee for credit cards averages 2.25% of the transaction in the United States, with debit cards capped at 21 cents per transaction for the largest banks. In Europe, credit card interchange is capped at 0.3% and debit at 0.2%.
Want to read the full article? View July 2021’s edition of Insights Magazine below: