6 Buy Now, Pay Later Solutions for Retailers

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If you’ve shopped online in the last year, you’ve probably noticed a newer type of payment option starting to appear more frequently. Tucked alongside the option to pay with credit card or PayPal is a link for “flexible” payments, or something called “buy now, pay later.” Large retail chains have been quick to adopt so-called after-pay solutions, but growth in the industry means smaller merchants are jumping on board this trend as well.

Buy now, pay later options have gone mainstream to become one of the fastest growing areas within the payments space.

Somewhere in between store cards and layaway programs are flexible payment solutions. These programs allow shoppers to pay for purchases in several installments. Although a few stores keep flexible payments in-house, most rely on outside firms like Affirm, Afterpay, and Klarna. Use of after-pay services grew by as much as 200% during the pandemic, which means even more payments providers are now moving into the space. 

With younger shoppers growing more distrustful of credit cards, and online shopping continuing to surge even as pandemic restrictions begin to relax, there’s a sense within the industry that flexible payment programs are here to stay. According to a recent analysis, buy now, pay later programs could reach $1 trillion in U.S. volume by 2025. That’s between 10x and 15x the current level.

Retailers that don’t start offering flexible payment options on their checkout pages soon risk losing shoppers who prefer the unconventional approach to financing, especially for more expensive items. Flexible payment solutions tout bigger carts, customization, and faster transactions among their benefits.

Here are six buy now, pay later payment programs that retailers can check out.

Flexible Payment Solutions for Retailers

1. Affirm

Affirm is a buy now, pay later service that’s best known for its close relationship with Peloton. The company works with businesses in any industry, with an adaptive checkout process designed to accommodate many different price points. Affirm prequalifies shoppers and offers longer terms (18, 24, or 36 months) for larger purchases. Most transactions are done using split pay, which breaks purchases down into four interest-free payments. Retailers get paid upfront, and Affirm says it helps to minimize the risks of chargebacks and fraud. In exchange for the service, Affirm charges most retailers a small percentage of each transaction. 

2. Afterpay 

More than 16 million shoppers in the U.S. have used Afterpay, making it one of the biggest flexible payment providers. The company works with businesses in multiple industries, including retail, travel, and home goods. By allowing their shoppers to pay for purchases over six weeks, retailers are able to increase average order value and provide a more customized shopping experience. Afterpay doesn’t run any external credit checks on shoppers and it doesn’t charge any application fees. The company says its top customers use the service an average of 48x per year. Merchants get paid “within days” for purchases made with Afterpay. Afterpay currently has a waitlist for merchants that want to offer its service to in-store shoppers, as well as online. Merchants are charged a small transaction fee plus commission.

3. Klarna

Klarna is another heavy hitter in the flexible payment space, reportedly adding more than 1 million users to its roster each month. Like its competitors, Klarna breaks most purchases down into four interest-free payments, while merchants get paid in full upfront. Customers who do fall behind on payments are charged a small fee in lieu of interest, and they are prevented from making any more purchases until they’ve settled their balances. Klarna says its checkout experience is 3x faster than competitors, and returning shoppers benefit from having their details and shipping options pre-filled. Retailers benefit from a number of ready-made marketing assets, like on-site messaging to decrease cart abandonment. Klarna’s fees to merchants max out at .30 cents plus a 5.99% fee per transaction.

4. Bread

Bread’s buy now, pay later solution is designed to drive growth and maximize conversions for retailers. It’s also one of the few white-label solutions in the space, giving larger retailers a way to accept installment payments without promoting any other third-party vendors in the process. Depending on how they set up the plug-in and direct API, retailers can choose to accept payments with installments or SplitPay. Merchants get paid upfront in full within three days of requesting settlement from Bread, minus a merchant discount fee, and Bread assumes the risk that comes with installment payments.

5. Sezzle 

Sezzle calls itself a Public Benefits Corporation, with a firm grip on the younger shopping market. Sezzle says its buy now, pay later program can help retailers decrease abandoned carts and increase conversions. Buyers who select the Sezzle option at checkout can pay for their purchases in four installments, at no extra cost. Sezzle assumes all risk, and merchants get paid in full immediately. Integration into most e-commerce sites is made with a simple API and platform-specific plugins. Although Sezzle does not currently have an option for in-store checkout, brick-and-mortar retailers can offer the installment payment option to customers who make purchases through their curbside or in-store pickup options. Merchants pay a set percentage of each order and a processing fee.

6. Splitit

Splitit is somewhat different from other flexible payment solutions on this list, in that it is a card-based program that works using consumers’ existing Visa and Mastercard credit cards. By breaking the cost of purchases made with existing credit cards into interest and fee-free monthly payments, Splitit can offer its service without any additional registrations or applications for consumers. Merchants continue to receive funds from their payment processors how they typically would, with Splitit managing all merchant installment transactions. Splitit can be integrated into an existing website using a standard web API, embedded code, or a plugin. Splitit offers multiple pricing options for merchants, starting from 1.5% plus $1.50 per installment.

Stephanie Miles is a senior editor at Street Fight.

Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.