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Are BNPL Options Right for Your eCommerce Channel?

BNPL options are good for shoppers and for merchants. Here's what you need to know before adding alternative financing to your checkout page.

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Anyone who has reached checkout at an eCommerce site lately has probably noticed a compelling “buy now pay later” (BNPL) offer. The year 2021 saw a surge in the use of BNPL options among online shoppers, and that surge shows no sign of abating. This alternative financing has become so ubiquitous that 49% of shoppers will only buy from online businesses that offer it.

BNPL allows eCommerce customers to pay for purchases in installments, with no additional charges and usually no interest fee. It is becoming the go-to payment option for online shoppers thanks to its flexibility, convenience and avoidance of credit card usage. According to recent surveys, about one-third (1 out of 3) of U.S. shoppers have used BNPL financing. A total of 62% said they had used BNPL five times or more, and 81% said they would do so again. 

How Does BNPL Work?

As the name suggests, BNPL is short-term financing that lets consumers pay for purchases at a future date, often interest-free. At checkout, customers pay the initial installment upfront and opt to pay the rest over time with a BNPL provider. The most popular BNPL model is pay-in-four, where a purchase is divided into four even payments over six weeks. The BNPL provider immediately pays the merchant the total purchase price (minus fees). The provider then collects the transaction amount from the customer per the terms of the installment payment agreement.

BNPL Is No Newcomer to the eCommerce Marketplace

BPNL programs were already gaining popularity before the COVID-19 pandemic began. BNPL has played a key part in consumer spending in the U.K. and parts of Europe since 2014. It is huge in Australia, where 60% (or 1.8 million) of consumers currently use BNPL options. Australia expects a projected BNPL growth of more than 120% in 2022.

BNPL gained traction in the U.S. in 2020 as the pandemic forced more people to shop online. It saw explosive growth over the next year as the number of U.S. BNPL users increased 81.2%. Consumers made $100 billion in BNPL purchases in 2021, a steep upward jump from the $24 billion in 2020. Experts predict those figures to increase up to 15 times by 2025.

For Consumers, BNPL Is All About Flexibility

80% of US shoppers use BNPL to avoid credit card debt.


By offering flexible payment options and bypassing credit card interest rates, BNPL makes the customer’s path to purchase more manageable. Here are a few reasons BNPL is so popular:

  • BNPL offers an alternative payment solution for budget-conscious and “credit adverse” consumers. Studies show that 45% of BNPL users prefer it to other forms of credit, like credit cards or store cards. BNPL offers consumers the flexibility to manage their finances, no matter their income level.
  • BNPL gives customers the flexibility to make larger purchases responsibly. A recent report found that avoiding paying credit card interest rates is the most common reason for using BNPL. BNPL allows people to buy products that would otherwise not fit their budget. These customers are also likely to spend more than they usually would, often on luxury or expensive items. 
  • BNPL makes online purchasing easier for a younger generation of shoppers. BNPL is particularly appealing for millennial and Gen Z shoppers who share a wariness of credit card debt. As a result, they are increasingly opting for BNPL platforms instead of traditional credit cards with high-interest rates. Gen Z usage has grown from 6% in 2019 to 36% in 2021. 

eCommerce Brands Are Jumping on the BNPL Bandwagon

eCommerce brands of all sizes are turning to providers like Afterpay, Klarna, Zip, Affirm and Sezzle to offer BNPL financing. In 2021, Amazon followed Target’s and Walmart’s leads in allowing customers to use Affirm at checkout. Wayfair, Lululemon, Casper, Charlotte Tilbury and Urban Outfitters are just a few eCommerce brands now offering BNPL options as well.

Advantages of BNPL for eCommerce Brands

illustration of conversion rate. A funnel that shows people going in the top and dollars coming out the bottom.

Online brands understand the benefits of offering alternative BNPL payment options for their customers. Nearly 25% of U.S. merchants already accept BNPL. Of those who do not, 46% say they are likely to offer it within the next year. BNPL offers eCommerce brands many advantages that will improve sales and conversions and keep them competitive. Some of those benefits include:

Higher Conversion Rates

According to a recent report, BNPL can increase eCommerce conversion rates by 20-30%. This boost is partly due because BNPL reduces friction in the sales funnel. BNPL removes customer hesitation at two critical funnel points: when deciding to add something to their cart and when they check out. Customers are more likely to complete the sales process when presented with an attractive BNPL option at key funnel points. The result for eCommerce brands is reduced cart abandonment and higher conversion rates.

Higher Average Order Value

BNPL encourages people to spend more money, which results in a higher average order value (AOV). AOV is an eCommerce metric that measures the average amount a customer pays when making a purchase. Many eCommerce brands have experienced a 130% increase in AOV after implementing BNPL financing. Today, the average order value for a BNPL transaction is $200, an increase of $100 compared to traditional payment options. BNPL options can also compel customers to purchase a higher number of products or more expensive products. 

It Is Risk-Free

BNPL options eliminate a merchant’s chargeback and fraud risks because BNPL firms assume those risks. Providers shoulder nonpayment risks and not the merchants. Non-paying customers are the provider’s problem, and it is up to them to collect the outstanding amount.

In the same vein, eCommerce brands that offer BNPL will never deal with customer chargeback. A chargeback is when a customer claims a business wrongfully charges them for a product. Since customers make payments to BNPL providers, they cannot initiate chargebacks against an eCommerce store. It’s the provider’s responsibility to deal with the laborious and costly process of investigating and settling chargeback claims.

Attracts New Business

Offering BNPL payment opens the door to new customers who might not have shopped due to budget restraints. It appeals to those with no or bad credit and financially underserved consumers with limited income. By offering payment options without credit checks, BNPL lets customers otherwise ineligible for a credit card make interest-free purchases. Access to this network of new shoppers allows eCommerce businesses to grow their customer base significantly.

Enhances the Customer Experience

BNPL payment options can significantly improve the customer experience by providing a financially responsible way to make purchases. A reported 55% of merchants say BNPL offers their customers a better experience. Other reasons BNPL can help drive a more enjoyable and seamless customer experience include:

  • Fuels the need for instant gratification
  • Gives customers more purchasing choices 
  • Allows customers to control their spending
  • Gives customers peace of mind in knowing they afford items 
  • Helps customers avoid credit card debt

BNPL Is Here to Stay

BNPL options deliver convenience and choice to consumers and a wide array of benefits to eCommerce businesses. Despite looming government regulations, experts predict the popularity of BNPL will continue to rise. Today, it is no longer a question of if eCommerce brands should offer BNPL options. Because of the many benefits it provides, there is no reason for eCommerce businesses not to offer their customers BNPL payment options. 

Want to become a conversion rate hero? Air360 by Scalefast is an invaluable tool to help you unlock your full CRO potential and optimize your digital experiences. Talk to a Scalefast expert today to learn more and schedule your Air360 demo.

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