Buy Now Pay Later - Everything You Need to Know

Illustrations by Drishya Subramaniam

As e-commerce expands at an unprecedented pace, merchants constantly look for innovative ways to attract and retain customers. One such solution that has been gaining popularity is Buy Now Pay Later (BNPL). BNPL is a payment method that allows customers to buy goods or services and pay for them later either in a single go or in instalments. In India, it was the fastest-growing payment method in 2020. And analysts predict that by 2025, it will account for 12% of total global e-commerce spent on physical goods.

In this article, we will discuss BNPL, what it is, and how a merchant can benefit from Buy Now, Pay Later. Read the article to learn how you can incorporate BNPL into your business.

What Is Buy Now Pay Later (BNPL)?

Buy Now Pay Later allows customers to buy goods or services and pay for them later. In case of instalments, the payment is typically divided into three or four instalments, with the first instalment paid at the time of purchase. The remaining payments are made over time, usually a few weeks or months, with no interest charged as long as the customer pays on time. For example, if a customer purchases an item of Rs. 1000, they could pay for it in four instalments of Rs. 250 interest-free.

BNPL Flow chart

BNPL is not a new concept. In fact, it has been around for a long time, but it has gained significant traction in recent years due to the growth of e-commerce and the increasing popularity of mobile payment solutions. BNPL providers such as Simpl, ZestMoney, and Flipkart Pay Later have been at the forefront of this trend, providing BNPL services to customers of various e-commerce merchants to increase conversion rates, average order value, and reach new customers.

How Does Buy Now Pay Later Work for Merchants?

Offering Buy Now Pay Later (BNPL) as a payment option as a merchant can be an appealing proposition for various reasons. Firstly, it can increase customer loyalty and retention, as customers are more likely to return to a merchant that offers a payment option that suits their needs. Secondly, it can boost sales, as customers are more likely to make a purchase when they know they can pay for it later in instalments. Thirdly, it can reduce the risk of fraud and chargebacks, as BNPL providers assume the risk of customer non-payment.

Merchants must collaborate with a Buy Now Pay Later provider to offer BNPL as a payment option. Typically, the provider will integrate its payment solution with the merchant’s E-commerce platform, allowing customers to choose BNPL as a payment option at checkout. When a customer chooses BNPL, the provider conducts a credit check to determine the customer’s creditworthiness. If the customer is approved for a credit line, the provider will pay the merchant the total purchase price upfront, less a processing fee. The customer will then pay the provider in agreed-upon instalments over a period of time.

What Are the Pros and Cons of Buy Now Pay Later?

As with any payment method, BNPL has pros and cons for merchants. Here are some of the main advantages and disadvantages:


1. Increased Conversion Rates

According to Baymard, approximately 69.82% of online buyers abandoned their carts in 2021. While there are numerous reasons why a customer may leave a website without making a purchase, around 7% do so due to a lack of suitable payment options or a financial emergency. Buy Now Pay Later assists retailers in allowing customers to purchase goods under either of the stated conditions. It also allows customers to use BNPL as payment and take advantage of ongoing sales and special discounts on a merchant’s website.

2. Better Consumer Satisfaction

High retail conversion rates are associated with satisfied customers, and giving customers control over their purchases makes them happier. Merchants encourage customers by providing them with this flexibility and various payment options, which results in positive customer feedback and a higher conversion rate.

3. A Wider Target Market

Retailers can significantly reduce the cost of making large customer purchases by breaking the total amount into smaller monthly payments with the help of the Buy Now Pay Later option. Online stores can make large purchases much more affordable by splitting them out over three, four, six, or more months instalments. This allows them to reach a larger audience, including younger people.


1. High Processing Fees

Nowadays, most BNPL service providers in the Indian market charge a small fee for each transaction. Nonetheless, the costs of BNPL are high compared to traditional payment methods, and they often range between 2% and 6% of the total acquisition cost.

2. Increases Consumer Debts

Another disadvantage is that BNPL frequently encourages people to buy more goods than they can afford. Customers may find themselves in a difficult financial situation, and even their credit scores may suffer if they miss or make late payments, and retailers may lose money as a result.

3. Problems with Direct Integration

Integrating BNPL as a payment option necessitates some workarounds. It usually demands specialized equipment and technology, which often increases the retailer’s cost. Many financial experts recommend using third-party Buy Now Pay Later services because they provide retailers with additional payment options and are a less expensive option. However, retailers can integrate with payment orchestration platforms such as Juspay to overcome this problem. These platforms have tied up directly with the BNPL service providers and hence provide an easy no-code integration experience.

Pros and Cons of BNPL

What Are the Industries that Benefit from Buy Now Pay Later?

In recent years, Buy Now Pay Later has been gaining popularity. Offering BNPL payment options as a merchant can increase sales, higher average order values, and increase customer loyalty. Let’s look at some industries that can benefit from BNPL payment options:


One of the most prominent industries that can benefit from BNPL payment options is retail. Retailers can increase sales by making high-priced items more accessible to customers by accepting BNPL payments. This is especially beneficial for retailers who sell high-ticket items like furniture, electronics, and appliances. Customers can also buy multiple items at once with BNPL payment options, increasing the average order value.


Another industry that can benefit from BNPL payment options is e-commerce. Indeed, BNPL payment methods are becoming increasingly popular in e-commerce, with many online retailers now accepting them. BNPL payment options can help e-commerce merchants reduce cart abandonment and increase sales. Merchants can make their products more accessible to customers who may not have the means to pay for the total purchase amount upfront by allowing them to pay for their purchases in instalments.


Health and wellness is another industry that can benefit from BNPL payment options. Many health and wellness products and services are expensive, making them out of reach for some customers. Merchants in this industry can increase sales by making their products and services more accessible to a broader range of customers by accepting BNPL services.


Finally, education is another industry that can benefit from BNPL payment options. Education can be expensive, particularly higher education. Educational institutions can make their programmes more accessible to a wider range of students by offering BNPL payment options. This can help educational institutions increase enrolment and revenue.

Buy Now Pay Later make it possible to offer financing without requiring a credit check, making it easier for customers to get the funding for their purchases. BNPL also provide an alternative to traditional credit cards, which can be helpful for customers who do not have or do not want to use credit cards. And it gives flexibility to merchants offering financing without the risk of nonpayment, as a third-party provider typically handles financing.

Finally, BNPL payment options can benefit a wide range of products and industries. Merchants can increase sales, reduce cart abandonment rates, increase customer loyalty, and make their products and services more accessible to a wider range of customers by accepting the Buy Now Pay Later option. If you are a merchant looking to expand your business, consider offering your customers BNPL payment options.

Juspay: One Stop Solution To All Your Payment Needs

As you strive to develop, optimize, and scale your business, it is essential to have a knowledgeable payments partner who comprehends the intricacies and hurdles that arise throughout the journey. This partner can provide valuable support and guidance to help you navigate the challenges effectively.

Juspay is a top choice as a payments partner for India’s prominent companies, providing a comprehensive infrastructure that directly connects to 300+ Payment Gateways, Payment service providers such as BNPL services, Networks such as Visa, Mastercard, and NPCI, and popular customer payment methods. With Juspay’s cutting-edge solutions, businesses can transform their payments experience, unlocking the potential for growth and success.


1. What are the eligibility criteria for buy now pay later?

The following eligibility criteria you should keep in mind to opt for BNPL service:

  • You must be an Indian citizen.
  • You must be at least 18 years old. In some cases, the maximum age of eligibility is 55 years.
  • You must be a salaried employee. For others, BNPL options are not available easily
  • You must have a bank account and all necessary KYC documents.

2. Does BNPL affect CIBIL score?

Your CIBIL credit score will be fine as long as you repay the amount on time. If you pay the amount on time, your credit score will likely increase. However, if you miss or delay your payment, it will lower your credit score.

3. Does Buy Now, Pay Later include interest?

Yes, you will be required to pay interest on your BNPL. The interest rate charged is determined by several factors, including the amount spent, repayment term, credit score, and so on. Some businesses initially provide a credit-free period. If you repay the money within the time frame, you will not have to pay any interest.