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Why more businesses are embracing buy now, pay later

Posted by Shivali Anand

February 22, 2022    |     4-minute read (681 words)

As buy now, pay later companies like Afterpay, Affirm, Klarna, Zip (previously Quadpay) and Sezzle gain traction among big retail players like Amazon and Walmart, the practice has begun to become mainstream. Customers are finding that a growing number of smaller retailers are debuting BNPL alternatives too.

The practice isn't confined just to online purchasing, as some firms are starting to offer it for in-store shopping. So, what's the deal with the BNPL trend?

The necessity for small companies to attract younger, convenience-driven clients — Generation Z and millennials — and inspire spontaneous purchases is reflected in the fast adaptation of BNPL services. In the end, it's all about making life easier for customers while ensuring cash flow.

How does BNPL work?

As the name implies, BNPL allows customers to purchase items and pay for them later. With BNPL, the total purchase price is divided into a series of equal installments, with the first installment due at the time of checkout. Unlike traditional installment plans, they usually charge no interest and no fees, with the exception of late fees. 

Because they tend to have higher purchasing limits, BNPL options can be preferable to standard credit cards. Most do not require a credit check, but terms vary by supplier.

Seven ways small businesses can benefit by offering BNPL

Attract younger customers:

BNPL options allow small businesses to reach a younger demographic that may not have previously shopped with them. An increasing number of younger customers are using BNPL services to buy items because they are searching for more affordable options. The number of Gen Zers in the United States that use BNPL climbed from 6% in 2019 to 36% in 2021, and millennials' use of the service has more than doubled to 41% since 2019, while Gen Xers' use has more than tripled in the same time frame, according to Cornerstone Advisors

Bigger client base:

In addition to appealing to younger and more tech-savvy customers, BNPL choices provide access to credit to consumers who previously couldn't get it, usually owing to a lack of credit history. They may now use BNPL to get zero-interest financing and buy purchases that they can pay off in installments.

Spurs spending:

The ease and flexibility of BNPL encourages customers to spend more. Customers open their wallets for impulse purchases that they would not have made otherwise.

Amplifies sales

: Baby boomers are also embracing BNPL options, according to Cornerstone Advisors. Overall, consumers are expected to spend $100 billion through BNPL programs in 2021, up from $24 billion and $20 billion in 2020 and 2019, respectively.


BNPL alternatives allow clients who are already suffering the effects of an economic downturn to break their payments into interest-free or no-cost installments over time. This enables consumers to buy certain products that are a bit out of their budget versus trying to pay at the moment, making the same items more accessible for BNPL customers and increasing the average order value for small enterprises.

More sustainable:

BNPL is a more sustainable approach for customers to get credit when they need it. Unlike credit cards, the BNPL model aims to boost transparency by delivering structured payback options, no hidden costs and little or no interest. 

Smoother customer experience:

Installment payments were previously only available at checkout, at the end of the customer experience. Customers' selections of products and providers are influenced by BNPL initiatives early in the purchase experience. Small companies can provide a smoother client experience while also ensuring a continual cash stream to keep the firm viable by offering a BNPL option.

Consumer activists unconvinced BNPL is a good thing

BNPL programs, despite their benefits, have their detractors. Consumer activists criticize the plans for enticing customers to take on debt they might not be able to afford. BNPL loans can also aggravate the difficulties of people already struggling to pay their expenses.


While not without controversy, buy now, pay later alternatives appear to be on their way to becoming a permanent feature in the retail scene, providing a superior alternative to credit cards and traditional installment plans for many consumers.

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