{"id":208527,"date":"2025-07-08T09:08:50","date_gmt":"2025-07-08T16:08:50","guid":{"rendered":"https:\/\/www.nationalfunding.com\/blog\/?p=208527"},"modified":"2025-06-16T15:15:59","modified_gmt":"2025-06-16T22:15:59","slug":"is-buy-now-pay-later-a-good-idea-for-ecommerce","status":"publish","type":"post","link":"https:\/\/www.nationalfunding.com\/blog\/is-buy-now-pay-later-a-good-idea-for-ecommerce\/","title":{"rendered":"Is Buy Now Pay Later a Good Idea for Ecommerce?\u00a0"},"content":{"rendered":"

Buy now pay later (BNPL) is a feature for ecommerce websites that allows customers to make multiple payments vs. having to pay everything upfront for their purchase. It is similar to layaway for brick-and-mortar stores in that a customer can make a purchase (taking the inventory), but instead of waiting for them to come back to pay and get the product, the BNPL company pays the retailer upfront and the product leaves inventory on a normal schedule.<\/span>\u00a0<\/span><\/p>\n

Offering buy now, pay later can help convert more customers, grow basket size, and increase total revenue, but the option comes with higher fees and lower credit score customers. It can make sense if the profit from sales (with larger-than-normal orders and new customers) is higher than the increased fees you have to pay.<\/span>\u00a0<\/span><\/p>\n

If adding buy now, pay later to a checkout process only switches customers from one payment option to another, it will erode profits due to the higher fees and may add more hassle for the retailer, because they\u2019ll have to deal with additional payment provider systems for returns and disputes.<\/span>\u00a0<\/span><\/p>\n

BNPL and credit card companies both pay the retailer in full following a sale, so there\u2019s no risk if a consumer stops paying later or defaults on their credit card. BNPL makes cash flow smoother compared to credit cards, as the money is applied to your business bank account faster and you don\u2019t face immediate pull backs during disputes like retailers do with credit cards.<\/span>\u00a0<\/span><\/p>\n

Pro-tip:<\/strong> Check your affiliate program for sub-networks and BNPL providers by name. Some join affiliate programs directly or through monetization tools and may entice your own customers to click their affiliate link. If this happens, you now have to pay a commission on your own customer when they check out the next time in addition to the fees you pay for the service.<\/span>\u00a0<\/span><\/p>\n

If you\u2019re thinking about adding one or multiple BNPL options to your store, here\u2019s how to figure out if doing so is a good way to grow your revenue and increase your customer base, or if BNPL is going to cause more trouble than it\u2019s worth.\u00a0<\/span>\u00a0<\/span><\/p>\n

When Adding BNPL Payment Options Makes Sense<\/span>\u00a0<\/span><\/h2>\n

Adding BNPL payment options to your store makes sense when the feature will convert more customers and grow your sales enough to offset the higher costs. Don\u2019t fall for the marketing hype from the BNPL companies, as the claims about increases in sales could be cherry-picked.<\/span>\u00a0<\/span><\/p>\n

Third-party research gives you a more reliable estimate, like <\/span>this one from the Journal of Retailing<\/span><\/a> that shows customers increased total online spending by 6.4%, or <\/span>this one from the Harvard Business Review<\/span><\/a> where customer basket size grew 10%. The study from the Journal of Retailing also found that BNPL helped lower abandoned carts to boost conversion rates.<\/span>\u00a0<\/span><\/p>\n

BNPL has higher fees than credit cards, so calculating if it makes sense financially is a good first step. Here\u2019s an easy three-step process to do this:<\/span>\u00a0<\/span><\/p>\n

    \n
  1. Calculate your <\/span>gross margin<\/span><\/a>.<\/span>\u00a0<\/span><\/li>\n
  2. Determine your transaction fee for credit cards vs BNPL.<\/span>\u00a0<\/span><\/li>\n
  3. Find your breakeven point.<\/span>\u00a0<\/span><\/li>\n<\/ol>\n

    Step 1: Calculate Your Gross Margin<\/span>\u00a0<\/span><\/h3>\n

    If you don\u2019t know the numbers offhand, you\u2019ll find them on your business income (profit and loss) statement:<\/span>\u00a0<\/span><\/p>\n