Discover the pros and cons of Buy Now, Pay Later (BNPL) installment plans, including the costs to merchants. 

Currently, one of the biggest trends in retail sales is Buy Now, Pay Later (BNPL). Many buyers like BNPL because it offers a way to pay for purchases over time with low- to no interest and without running up their credit card balances. For merchants, there are pros and cons to offering BNPL to your customers.

The pros of offering Buy Now, Pay Later

For merchants, BNPL tends to increase two key performance indicators: conversion rates and average order value.

The higher conversion and spending rates are in part due to the fact that BNPL typically doesn’t affect a customer’s credit score. Many merchants opt to do a soft credit check instead of a hard inquiry, but the decision is up to the merchant offering these plans.

Higher conversion rates and higher order vales can pay off big for sellers. Before determining whether BNPL might be a good move for your business, be mindful of the drawbacks.

The cons of offering Buy Now, Pay Later

BNPL services are typically administered through third-party lenders. Merchants pay them a fee, typically 2-8% of the purchase price, which can become a significant expense.

Another con of BNPL is that if customers do not fully understand the repayment terms, they may view your company unfavorably when they are hit with late fees. Also, missing a payment or paying late will likely be indicated on the buyer’s credit score.

Additionally, returns for BNPL purchases can get complicated as customers are required to contact both the merchant and the lender to receive a refund.

Another possible con is that the lender’s customer service can affect your business reputation by association. Customers may not make a distinction between the lender and the seller because the BNPL process is quite seamless at checkout time.

Taking traditional credit and debit cards

Deciding whether to offer BNPL requires careful consideration. If you decide to stick with traditional credit and debit card purchases, be sure to check out Consumers’ low-cost merchant services offered in partnership with the Michigan Retailers Association.

Consumers provides banking services for more than 131,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want.

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