Buy Now Pay Later (BNPL) has become an increasingly prominent payment option, allowing consumers to spread the cost of purchases over several instalments rather than paying the full amount upfront. For merchants, offering BNPL can create another way to accommodate different customer budgets and purchasing preferences, particularly for higher value purchases.
BNPL is gaining traction across international markets. Globally, it accounts for 4% of eCommerce transactions, rising to 9% in Europe and 6% in North America. These figures highlight the growing role of flexible payment options in the digital checkout experience.
The growth of BNPL reflects a wider shift in how consumers expect to pay. In the UK, 20% of adults, equivalent to 10.9 million people, used BNPL in the 12 months to May 2024, according to the Financial Conduct Authority (FCA). This was up from 17% or 8.8 million adults in 2022.
The market is also continuing to expand. BNPL transaction value in the UK is forecast to reach approximately USD 48.6 billion in 2026 and could exceed USD 106.4 billion by 2031. Based on the figures provided, the UK's share of overall BNPL transaction value in Europe is expected to increase from 22.31% in 2026 to 23.94% in 2031.
As BNPL becomes more established, understanding how it works, why consumers use it, its benefits and potential risks is increasingly important for businesses operating in eCommerce and other sectors where flexible payment options can influence purchasing decisions.
What is Buy Now Pay Later?
Buy Now Pay Later is a form of short term credit that allows customers to purchase goods or services immediately and pay for them over an agreed period. Depending on the provider and product, customers may pay in several instalments, defer payment for a set period or pay no interest when repayments are made according to the agreed terms.
BNPL is generally offered during the checkout process alongside traditional payment methods such as cards, digital wallets and bank transfers. When a customer selects BNPL, the provider typically assesses the transaction and, where approved, pays the merchant while the customer repays the BNPL provider according to the agreed schedule.
For example, a customer purchasing a GBP 400 item could choose to pay for it in four instalments of GBP 100 rather than paying GBP 400 at checkout. The exact repayment structure, fees and eligibility requirements vary between BNPL providers.
It is important to recognise that BNPL is a form of borrowing, even when the customer does not pay interest. In the UK, the regulatory landscape has also evolved significantly. Since 15 July 2026, Deferred Payment Credit, commonly referred to as BNPL, has been regulated by the FCA when it meets the relevant criteria. The new rules introduce greater consumer protections, including requirements around information and affordability.
The distinction between different types of BNPL is important because the term can cover several credit arrangements. Some products are interest free when customers repay according to the agreed schedule, while others may charge interest or fees depending on the product and repayment terms.
For consumers, BNPL can provide greater flexibility when managing the cost of a purchase. For merchants, it can add another payment option at checkout and help meet growing expectations for choice and payment flexibility. As the market develops, however, businesses need to consider not only the commercial opportunity but also customer affordability, transparency and responsible use of credit.
How Buy Now Pay Later works
Buy Now Pay Later typically works by allowing a customer to select a BNPL option at checkout and divide the cost of their purchase into a series of scheduled payments. While the exact process varies between providers, the customer journey generally follows these steps:
- The customer selects BNPL at checkout - when completing a purchase, the customer chooses Buy Now Pay Later from the available payment methods. The terms of the payment plan, including the number of instalments, repayment dates, interest and any applicable fees, are presented before the purchase is completed.
- The BNPL provider assesses the customer - depending on the product and provider, the customer may undergo an eligibility or credit assessment. The provider determines whether the customer can use the selected BNPL option based on its requirements.
- The transaction is approved - if the customer is approved, the BNPL transaction is authorised and the purchase can proceed. The merchant receives payment according to its agreement with the BNPL provider, while the customer becomes responsible for repaying the provider.
- The customer receives the purchase - the order is processed by the merchant as normal. From the customer's perspective, the main difference is that the purchase is paid for according to the selected BNPL schedule rather than entirely at the time of purchase.
- The customer makes the agreed repayments - the remaining balance is collected according to the repayment schedule. Depending on the BNPL product, payments may be automatically collected from a linked card or bank account.
The process can make BNPL feel similar to a standard checkout payment from the merchant's perspective, while the credit relationship sits between the customer and the BNPL provider. However, the specific responsibilities, settlement arrangements and fees can vary between providers and agreements.
Benefits of Buy Now Pay Later
The growing adoption of BNPL reflects demand for greater flexibility at checkout. When implemented responsibly, BNPL can offer benefits for both consumers and merchants.
Greater payment flexibility
BNPL gives customers an alternative to paying the full purchase price upfront. Spreading the cost across several scheduled payments can make larger purchases easier to manage within a customer's budget.
More choices at checkout
Consumers increasingly expect businesses to offer payment methods that suit different preferences and financial circumstances. Adding BNPL alongside cards, digital wallets and other payment options can give customers greater choice when completing a purchase.
Potential to increase purchasing power
Because customers can spread payments over time, BNPL can make higher value purchases more accessible to eligible customers. This can be particularly relevant for sectors such as retail, travel, electronics and home improvements where individual transaction values can be relatively high.
A convenient checkout experience
BNPL can be integrated directly into the checkout journey, allowing eligible customers to select a payment plan without arranging a separate traditional loan. Clear information about repayment terms can help customers understand the commitment before confirming the purchase.
Potential benefits for merchants
For merchants, BNPL can provide another way to accommodate changing consumer payment preferences. Offering flexible payment options may help businesses reduce barriers to purchase, particularly when customers are considering higher value products or services.
However, BNPL should not be viewed as a solution for increasing sales at any cost. Its value depends on providing customers with clear information, appropriate payment options and a responsible experience. For merchants, choosing a BNPL solution that integrates effectively with their existing payment infrastructure can also help create a consistent checkout experience across different payment methods.
Are there any disadvantages to BNPL?
While BNPL offers multiple benefits, consumers need to use it responsibly to ensure a positive shopping and payment experience. From a customer’s point of view, budgeting is crucial when deciding to go for a BNPL service. In fact, customers should consider their financial circumstances and make sure they can meet the payment requirements before committing to a BNPL plan. Moreover, late or missed payments can affect the credit score of consumers.
To make an informed buying decision, it’s equally important for customers to do their due diligence in understanding the terms of BNPL providers and whether there are any costs involved. Interest free repayments tend to apply to short-term loans where customers pay the provider back in 30 days or over three to four instalments. If shoppers want to spread the cost over a longer period of time, then they may be possibly charged from that point onwards.
Timely repayments are also a necessity and customers should avoid skipping or missing a payment, as it can lead to fees or negative impacts on their credit score.
Types of Buy Now Pay Later
BNPL is not a single type of payment product. Providers offer different repayment structures depending on the purchase value, customer eligibility and terms of the agreement. The most common types include:
Pay in instalments
Customers divide the cost of a purchase into a fixed number of instalments, often with the first payment made at checkout. Depending on the provider and product, the remaining payments may be collected weekly or monthly. Some instalment plans are interest free when payments are made on time. Visa Instalments and PayPal Pay in 3 are examples of an instalment based payment solution, allowing eligible cardholders to split the cost of purchases into multiple payments.
Pay later
Pay later products allow customers to receive their purchase immediately and pay the full amount at a later date. This can be useful for customers who want to defer payment for a short period rather than spread the cost across multiple instalments.
Longer term BNPL financing
For higher value purchases, some providers offer longer repayment periods. Customers repay the balance over several months or longer and may be charged interest depending on the product and provider. These arrangements can be closer to traditional forms of consumer credit.
The terms, fees, interest rates and eligibility requirements can vary significantly between BNPL providers. Customers should always review the repayment schedule and total cost before selecting a payment plan.
Buy Now Pay Later vs traditional credit
BNPL and traditional credit both allow consumers to purchase goods or services without paying the full cost upfront, but they can differ in how the credit is provided, repaid and presented at checkout.
BNPL is generally offered directly within the purchase journey. Customers can select a repayment plan at checkout and, depending on the product, may be able to spread the cost across several interest free instalments or defer payment. The application and approval process is typically integrated into the checkout experience.
Credit cards provide a reusable line of credit that customers can use for multiple purchases. Depending on the card and repayment behaviour, interest may be charged on outstanding balances. Credit cards can also offer features such as rewards, purchase protection and balance transfers.
Personal loans typically provide a fixed amount of credit that is repaid over an agreed period, usually with interest. Unlike BNPL, a personal loan is generally arranged separately from the individual purchase and can be used for a broader range of expenses.
| BNPL | Credit card | Personal loan | |
| How it is accessed | Usually at checkout | Through a credit card account | Through a loan application |
| Repayment | Usually fixed instalments or deferred payment | Flexible repayments | Fixed repayments over an agreed term |
| Interest | May be interest free or interest bearing | Often charged on outstanding balances | Generally charged |
| Typical use | Individual purchases | Multiple purchases | Larger or broader expenses |
| Integration with checkout | Directly integrated | Widely accepted at checkout | Usually separate from checkout |
The most appropriate option depends on the customer's circumstances, the cost of the purchase and the terms offered. BNPL can provide convenience and payment flexibility, but it remains a form of borrowing and should be used responsibly. Customers should consider the total cost, repayment schedule and any fees before committing to credit.
Is BNPL right for your business?
While BNPL can help you boost sales and grow your revenue, it may not necessarily be suitable for every business.
In terms of integration, it’s best to evaluate the compatibility of BNPL platforms with your existing eCommerce infrastructure and payment gateway. Another parameter to keep in mind is the fees and costs you may incur depending on the BNPL provider you choose to partner with. That being said, understanding the expenses attached to the BNPL offering is paramount. These charges may encompass transaction fees or other fees related to sharing revenue with the provider, and more.
It’s also crucial to study the preferences of your target consumers. If your customers are likely to favour BNPL, it could be an invaluable addition to your payment strategy.
Buy Now Pay Later fraud
As BNPL becomes more widely used, it can also become a target for fraudsters. Common risks include account takeover, stolen payment credentials, identity theft and fraudulent transactions made using compromised customer accounts. Merchants should therefore consider how BNPL fits into their wider fraud prevention and risk management strategy.
Strong authentication, transaction monitoring and effective fraud detection can help businesses identify suspicious activity while protecting genuine customers. For a deeper look at the risks and how businesses can protect their payment journeys, read our guide to Buy Now Pay Later fraud.
FAQs
Is Buy Now Pay Later interest free?
Some BNPL options are interest free if payments are made on time, while others may charge interest or fees. The total cost depends on the provider and payment plan.
Does Buy Now Pay Later build credit?
BNPL may or may not help build a credit history depending on the provider, the type of credit product and how payments are reported to credit reference agencies.
Does Buy Now Pay Later affect your credit score?
Using BNPL can affect your credit score in some circumstances. The impact depends on the provider, the type of credit check carried out and whether you make repayments on time.
Can you use Buy Now Pay Later with a debit card?
Many BNPL providers allow customers to make repayments using a debit card, although accepted payment methods vary between providers and products.
Can you use Buy Now Pay Later for any purchase?
Not necessarily. BNPL availability depends on the merchant, provider, purchase value, product category and customer eligibility. Some providers and merchants may also restrict BNPL for certain types of purchases.
Is Buy Now Pay Later available in the UK?
Yes. BNPL is widely available in the UK and is used for purchases across sectors, including retail, travel and eCommerce. The UK BNPL market is also subject to an evolving regulatory framework.
Is Buy Now Pay Later better than a credit card?
Neither option is universally better. The right choice depends on factors such as the purchase amount, repayment terms, interest rates, fees and the customer’s financial circumstances.
What happens if you don't pay Buy Now Pay Later?
Missing a BNPL repayment can result in fees, restrictions on future use or other consequences depending on the provider and product. It may also affect your credit record, where missed payments are reported.
What happens if you return something bought with Buy Now Pay Later?
The refund process depends on the merchant and BNPL provider. Once a return is accepted, the provider will normally adjust or cancel the relevant repayments in accordance with its refund process.
How emerchantpay can help
BNPL has emerged as a preferred alternative payment method for consumers, as it provides them with the ease and flexibility to better manage their expenses. At the same time, offering BNPL services can help merchants extend their market reach while opening up new avenues for driving sales and revenue.
At emerchantpay, we take pride in our global payment solution that offers a wealth of features. These include global acquiring, alternative payment methods, fraud and risk management and many more. Our experienced and knowledgeable team of payment specialists are here to give you strategic support in optimising your setup. This way, you can start accepting BNPL and other popular payment options across channels, thereby providing your customers with a frictionless and safe payment flow.
Thinking about adopting BNPL and supercharging your payment strategy for higher conversions? Speak to our team of payment experts today and find out how.