What is BNPL? A merchant's guide to buy now, pay later

Alexis Damen | April 19, 2021 | Updated: June 3, 2026

Image source: Unsplash

Seven out of 10 shoppers add items to their cart and then leave without buying. The total at checkout is the second biggest reason, accounting for nearly 40% of all abandoned shopping carts. If you can't offer them a way to split that cost into smaller installments, the sale is gone, and so is the customer.

That's the gap BNPL closes. Buy now, pay later is a short-term financing option that lets shoppers split a purchase into smaller installments at checkout, but you always receive payment in full upfront. It's the fastest-growing payment method in European commerce, and many of your customers, especially the younger ones, now expect to see it at checkout.

This guide breaks down what BNPL is, how it works, what it costs, its advantages, and how to add it to your store. Whether you sell online, in person, or both, you'll come away with a clear sense of whether buy now, pay later fits your business and how to get started.

📌 Key takeaways

BNPL (buy now, pay later) is a short-term financing option that lets shoppers split a purchase into installments at checkout, usually interest-free if paid on time.
The shopper picks BNPL at checkout, and you get paid in full up front, minus a 2-6% fee. The provider collects from the shopper in installments over weeks or months.
Offering BNPL can lower cart abandonment by around 35%, lift average order value by 15 to 40%, and reach younger shoppers who often don't carry credit cards.
The main risk is consumer over-indebtedness. From late 2025 through 2026, the EU's Consumer Credit Directive II and the UK's FCA regime are bringing BNPL under standard credit rules.
MONEI Flex lets you offer BNPL on a shopper's existing credit card alongside cards, Apple Pay, Google Pay from one dashboard.

What is BNPL?

BNPL stands for "buy now, pay later", which is a short-term financing option that lets shoppers split a purchase into smaller installments at checkout, usually interest-free if they pay on time.

Instead of paying the full amount up front or reaching for a credit card, the shopper agrees to a payment plan: a first installment now, the rest spread over the following weeks or months.

The BNPL provider pays the merchant the full amount upfront and then collects it from the shopper over time, taking on the credit risk.

You'll see BNPL described under a few different names depending on the country and the provider:

Buy now, pay later
Pay later
Split payments
Deferred payment
Pay in 3 / pay in 4 / pay in installments

They’re all used to describe the same idea: the shopper walks away with the product today and pays in installments, while you get paid upfront in full.

How is BNPL different from a credit card or a personal loan?

Approval is instant at checkout and usually only runs a soft credit check.
Repayment terms are short—weeks to a few months—and almost always interest-free when paid on time.
The credit line is tied to a single purchase rather than an ongoing revolving balance.

How does buy now, pay later work?

The shopper picks BNPL at checkout, the order goes through, and you get paid right away. Installment payments happen between the shopper and the BNPL provider in the background.

Here's the typical flow on a checkout that supports BNPL:

The shopper adds items to their cart and goes to checkout.
Alongside cards, wallets, and other payment methods, they pick a BNPL option.
They enter a few personal details and the BNPL provider runs a soft credit check, which is usually approved in seconds.
If approved, the shopper sees the payment plan (for example, €25 today, then €25 every two weeks) and confirms.
The order goes through. You're paid in full by the BNPL provider, minus a transaction fee. The shopper repays the provider in installments.

BNPL example

A shopper buys a €100 jacket and picks pay-in-4 at checkout.

They pay €25 today.
Two weeks later, the provider charges another €25 to their card.
The same thing happens in weeks 4 and 6.
After six weeks, the jacket is paid off in full, with no interest.

You receive €100, minus the BNPL fee, on day one, just like a standard card transaction.

What does a typical BNPL payment plan look like?

Not all BNPL plans are the same. The main formats are:

Pay in 3 / pay in 4. Short-term, interest-free, repaid over 4–8 weeks. Most popular for fashion, beauty, and small electronics.
Pay in 30. A single deferred payment, no installments, interest-free.
Longer-term financing. 6, 12, or 24 monthly installments, often with interest. Used for higher-ticket items like furniture, appliances, or laptops.

Which option appears at checkout depends on the provider you connect to, the order value, and the shopper's eligibility.

The advantages of BNPL for sellers

In Spain, the BNPL market reached around $8.9 billion in 2025 and is forecast to grow roughly 12% a year through 2030. Across Europe more broadly, the BNPL market is on track to grow 12.4% in 2025 alone, reaching $191.3 billion, with northern European markets like Germany and Sweden leading adoption.

That growth is also drawing regulatory attention. The European Banking Authority flagged BNPL in its 2024/25 Consumer Trends Report as a key driver of consumer over-indebtedness, which is why new EU rules are tightening. For you as a merchant, it’s safe to assume that a meaningful share of your customers expects to see BNPL at checkout.

For shoppers, BNPL is a payment option; meanwhile, it's a conversion lever for your business. Here are the advantages to consider:

Lower cart abandonment

Sticker shock at the final step is one of the biggest reasons shoppers walk away. When the total drops from "€140 now" to "€35 today and three more payments," the decision feels smaller. Mastercard reports that offering BNPL can reduce cart abandonment by around 35%.

Higher average order value

When the price is split, shoppers tend to spend more. Industry data from Statista puts the average order value uplift on BNPL transactions in the 15–40% range, depending on the vertical. For higher-ticket categories like electronics, furniture, or fashion, that lift can be the difference between a profitable order and an abandoned cart.

Increase customer lifetime value (CLV)

Customer lifetime value is the total revenue a shopper generates over the entire time they keep buying from you. The higher the CLV, the more each customer is worth before you spend another euro to keep them around.

E-commerce customer acquisition costs increased by roughly 40-60% between 2023 and 2025, driven by ad-platform price inflation and tighter privacy rules. Every customer you keep is worth more than one you chase down with new ad spend.

BNPL helps retention in two ways. Shoppers who use it tend to come back when they have another purchase to make, and they associate the smoother checkout with your store. Over time, that turns into repeat orders, higher spend per visit, and a higher CLV.

Stay competitive as adoption grows

The global BNPL market reached approximately $560 billion in transaction volume in 2025 and is projected to reach roughly $576 billion in 2026, with growth across all major regions.

If your competitors offer BNPL and you don't, shoppers who rely on it for purchases will assume it's elsewhere and click out. Offering BNPL isn't unique anymore; customers expect it on every site they shop on.

Access to younger shoppers

The largest BNPL users are Millennials and Gen Z. The U.S. Consumer Financial Protection Bureau found that among borrowers aged 18–24, BNPL accounts for about 28% of unsecured consumer debt, compared with 17% across all age groups.

BNPL has gone mainstream across Europe, with roughly 68% of consumers having used it at least once and around 40% using it frequently. Adoption is highest in Germany, Sweden, and the Nordic countries, and is growing fastest in Southern European markets such as Spain and Italy.

The UK Financial Conduct Authority's Financial Lives 2024 survey confirms that adults aged 25 to 34 had the highest BNPL usage among all age groups.

Many in this group don't carry a credit card and are used to choosing their payment method. Offering BNPL is one way to make sure they consider your business.

You get paid up front while the provider takes the risk

The BNPL provider pays you the full order amount on day one, minus a transaction fee that typically ranges from 2–6%. If the shopper misses a payment, that's between them and the provider. You don't need to manage installments or chase debt, and you never risk losing the original payout.

Should you add BNPL to your store?

BNPL isn't right for every store. Before you turn it on, run through this checklist:

Is your average order value high enough that splitting the cost would meaningfully change the buying decision? BNPL pays off most clearly on baskets above €50.
Are you seeing significant cart abandonment at the final step? If shoppers are bouncing on price, BNPL gives them a way to keep going.
Does your target customer skew young, or include shoppers who don't lean on credit cards? If yes, BNPL closes a payment gap.
Can your margins absorb a 2–6% transaction fee? If your category is high-margin (fashion, beauty, electronics, home goods), the math usually works. If margins are tight, run the numbers before committing.

BNPL risks and considerations

BNPL is a useful payment method, but it's not without trade-offs. It’s usually riskier for shoppers than businesses, but those risks are reshaping how the industry is regulated, which affects how you implement BNPL at checkout.

The risk for shoppers

The same things that make BNPL frictionless also make it easy to overspend. The cost is split into small installments, so the brain treats it as a smaller decision, which behavioral economists call a reduction in the "pain of paying." Shoppers can stack purchases across multiple BNPL accounts without realizing how the totals add up.

The Bank of Spain warns that BNPL can encourage impulsive purchases and create "a false sense of immediate savings," with real consequences if multiple small debts compound over time. The European Banking Authority echoed the same concern in 2025, listing BNPL as a key driver of consumer over-indebtedness across the EU.

If a shopper misses payments, late fees and interest can kick in. In some cases, the provider passes the debt to a credit bureau or to a collections agency, which can affect the shopper's credit standing.

Regulation is tightening across Europe

Until recently, most BNPL products fell outside traditional consumer credit rules. That's changing fast.

The EU's revised Consumer Credit Directive (CCD2), adopted in 2023, requires member states to bring BNPL under standardized credit rules. Most member states had to transpose CCD2 into national law by late 2025, with full enforcement expected by Q4 2026. CCD2 closes the previous exemption for short-term, interest-free credit of up to €200. BNPL providers now have to run affordability checks, disclose total costs clearly at checkout, and follow the same pre-contractual information standards as any other lender.

In the UK, the Financial Conduct Authority is bringing BNPL fully under its remit from 2026, with mandatory affordability checks, clearer disclosures, and access to the Financial Ombudsman Service for BNPL complaints.

What this means for your business

The main takeaway is that it’s crucial to choose a BNPL provider that's already aligned with the new rules. Things to look for:

Licensed lender status in the country where you sell
Transparent disclosure of fees, interest, and total cost at checkout
A clear affordability check process
A defined dispute and refund flow

A regulated, well-run BNPL partner reduces your compliance exposure while protecting the shopper. If your provider isn't ready for CCD2 or FCA compliance, that's a sign to look elsewhere.

How to accept BNPL with MONEI

MONEI lets you offer BNPL at checkout through MONEI Flex, a built-in payment-splitting option that works on the shopper's existing credit card. No separate account for them to create, and no extra paperwork for you.

At checkout, shoppers split their purchase into 3, 6, 9, or 12 monthly installments charged to their card. You receive the full order amount upfront, with no added credit risk. MONEI Flex runs alongside cards, Apple Pay and Google Pay from a single integration and one dashboard.

Ready to add BNPL to your store? Open a MONEI account and configure MONEI Flex in a few clicks.

Sources used

50 Cart Abandonment Rate Statistics 2026 - Baymard Institute
Spain Buy Now Pay Later Business Report 2025 - Fintech Futures
Europe Buy Now Pay Later Business Report 2025 - Business Wire
EBA CONSUMER TRENDS REPORT 2024/25 - European Banking Authority
Mastercard enters "buy now, pay later" race. But experts say these loans carry risks - CBS News
Average order value (AOV) of online stores with and without BNPL options in 2022, by revenue range - Statista
Customer Acquisition Cost Benchmarks - Genesys
Global transaction value of buy now, pay later (BNPL) in e-commerce from 2014 to 2025 - Statista
Buy Now, Pay Later (BNPL) in European E-Commerce - Cross-border Magazine
Key findings from the FCA’s Financial Lives May 2024 survey - Financial Conduct Authority
“Buy Now, Pay Later”: el auge del “compra ahora y paga después” - Banco de España
Directive (EU) 2023/2225 of the European Parliament and of the Council of 18 October 2023 on credit agreements for consumers and repealing Directive 2008/48/EC - European Union
New protections confirmed for Buy Now Pay Later borrowers - Financial Conduct Authority

Frequently asked questions

BNPL stands for "buy now, pay later." It's a short-term financing option that lets a shopper split a purchase into smaller installments at checkout, usually interest-free if they pay on time. The BNPL provider pays the merchant upfront and collects from the shopper over the agreed schedule.

The shopper is on the hook, not the merchant. The BNPL provider typically retries the charge, applies a late fee, and may pause the shopper's account until the shopper catches up. If missed payments stack up, the provider can report the debt to a credit bureau or pass it to collections. The merchant has already been paid.

It depends on the provider and the plan. Short-term, interest-free BNPL (pay-in-3 or pay-in-4) is often not reported to credit bureaus, so on-time use has no effect on a credit score. Missed payments and longer-term financing plans are more likely to be reported. From July 2026, the UK's FCA BNPL regime will require providers to share data with credit reference agencies, and the EU's CCD2 is pushing providers across member states in the same direction through its creditworthiness-check requirements.

Technically, yes. BNPL is a form of short-term consumer credit, which is why the EU's Consumer Credit Directive II now brings it under standard lending rules. In practice, BNPL is faster and lighter than a personal loan: instant approval at checkout, smaller amounts (typically €20 to a few thousand euros), and no interest when paid on time.

Yes. The EU's revised Consumer Credit Directive (CCD2), adopted in 2023, brings BNPL under standardized credit rules across all member states. Transposition deadlines passed in November 2025, with full enforcement from November 2026. In the UK, the Financial Conduct Authority is bringing BNPL fully under its remit in 2026.

BNPL transaction fees typically fall within the 2-6% range and are paid by the merchant on each BNPL order. The exact rate depends on the provider, the plan length, and the merchant's volume. But there’s a trade-off. In exchange for that fee, you get paid in full up front, and the BNPL provider (like MONEI) assumes the credit risk.

Alexis Damen

Alexis Damen is a former Shopify merchant turned content marketer. Here, she breaks down complex topics about payments, e-commerce, and retail to help you succeed (with MONEI as your payments partner, of course).

#BNPL #Payment Trends #E-commerce Trends #Online Payments