What You Need To Know About BNPL For Merchants

Buy Now Pay Later (BNPL) isn’t just a payment method. It can help customers spend more and increase your revenue. As more businesses adopt BNPL, not offering it could mean losing sales.

Here’s what you need to know before implementing it in your business.

What Is Buy Now, Pay Later For Small Business?

Buy Now, Pay Later lets customers split a purchase into multiple installments. It makes higher-priced items feel more affordable, which can help boost sales.

Like credit cards, BNPL comes with some fraud and repayment risks, but it can be used safely for both online and in-person purchases.

How Does Buy Now, Pay Later Work For Merchants?

Accepting BNPL is similar to taking a credit card. Your business gets the full purchase amount upfront, while the customer pays it off in installments. Most merchants choose one or two BNPL providers and promote them in-store or online.

Some POS systems offer BNPL acceptance built in. For example, Square merchants can accept Afterpay in-store or through their online checkout.

Benefits of BNPL For Businesses

Here’s a breakdown of the benefits of offering BNPL:

Drawbacks Of BNPL For Businesses

BNPL isn’t perfect. Merchants may see higher fees and slower checkouts, and not every business qualifies. Common drawbacks include:

How Do BNPL Companies Pay Merchants?

BNPL providers typically deposit the full purchase amount into your merchant account within 1 – 3 business days. You can track payouts and transaction details through the provider’s merchant portal.

How Much Do BNPL Companies Charge Merchants?

BNPL comes with fees and requirements for both merchants and consumers. Merchant fees typically range from 3.39% – 6% + $0.30 per transaction, while consumers only pay fees if they miss a payment.

Key points to know:

• Missed payments may lead to credit reporting, frozen accounts, or collections.
• BNPL providers may run soft or hard credit checks on applicants.
• Merchant eligibility often depends on your business type and whether it falls under a restricted industry.
• Standard BNPL plans use four payments over six weeks, billed every two weeks.
• Many BNPL companies now offer longer-term loans (6 – 12 months) and virtual card options.

Popular Buy Now, Pay Later Providers

Here’s a quick overview of the top BNPL providers.

How To Become A Buy Now, Pay Later Merchant

Becoming a BNPL merchant is simple: apply to a BNPL provider, get approved, and integrate the service into your online store or POS system.

Most BNPL companies offer quick onboarding, easy integrations, and marketing tools (like web badges and in-store signage) to help you promote BNPL as a payment option.

Buy Now Pay Later Risks For Merchants (And How To Avoid Them)

BNPL works a lot like credit cards when it comes to risk. Most fraud losses fall on the BNPL provider, but certain situations can cost merchants money — especially when fraud or chargebacks are involved.

Stolen Or Fake Identities

Fraudsters may apply for BNPL loans with stolen or fabricated credentials, or hijack a legitimate account. If the BNPL provider or credit card company reverses the transaction, the merchant may lose the funds.

BNPL Chargeback Fraud

Customers can dispute BNPL purchases, claiming they didn’t authorize the transaction. The BNPL provider refunds the customer, and the merchant loses the sale and may pay a chargeback fee. Here’s what else to know:

• Some cases are deliberate fraud.
• Others are “friendly fraud,” like when a customer doesn’t recognize the transaction.
• Merchants only win 20% – 30% of chargeback disputes.

How To Protect Your Business From BNPL Fraud

BNPL fraud risks are similar to credit card risks but can be higher due to easier borrower approval. To reduce exposure:

• Choose BNPL providers with strong fraud controls. Larger, well-known BNPL companies generally do better identity and risk checks.
• Keep your website and POS secure. Make sure your eCommerce platform, POS software, and payment tools have solid security features like tokenization, fraud screening, and updated PCI compliance.