Pressroom  /  Complete Guide to using Buy Now Pay Later Payment Methods for Ecommerce Merchants
August 23, 2022

Complete Guide to using Buy Now Pay Later Payment Methods for Ecommerce Merchants

Posted on 23 August 2022 by Ryan Copeland

An in-depth look at what Buy Now Pay Later is and whether it’s a good payment option for ecommerce businesses to offer their customers.

Word on the street is there’s a new payment option taking the eCommerce world by storm.

It’s not completely new to shoppers and in all honesty, it’s not ground-breaking. But it is the latest way for eCommerce businesses to meet the ever-changing needs of their customers. And it’s called Buy Now Pay Later.

Alarm bells ringing? Hold those feelings. Whilst some of the industry chatter highlights more of the ‘perceived’ cons of Buy Now Pay Later, the facts can’t be argued with…

In 2020, the UK’s adoption of BNPL products alone nearly quadrupled. In fact, it’s now thought to be at around £2.7 billion, with around 5 million people purchasing products this way – clearly an option customers wanted to see introduced.

With so much ‘good chatter’ going unheard, we’re here to tell you everything you need to know about offering Buy Now Pay Later payment methods to your customers on your eCommerce website.

We’ll take a look at:

Once you’re all read up, you’ll be in a position to decide whether using buy now pay later for your ecommerce website is the right option.


Buy Now Pay Later pretty much does what it says on the tin – allows shoppers to buy items now but pay for them at a later date.

It’s a flexible payment option designed to help customers buy products and spread the cost, rather than paying a large amount upfront. What’s more, unlike standard credit facilities, there’s usually no interest payable (more on this later), making it a really attractive offering to shoppers.


Offering Buy Now Pay Later to your online customers is a lot simpler than you may think. It may seem like a lot of development work would be involved, but that’s not always the case.

You see, Buy Now Pay Later schemes are offered to merchants via third-party providers, so once you’ve chosen your provider and opted in, only minor changes to your eCommerce site will be required – site structure and age dependent of course.

The process for the customer is rather simple too. In fact, the shopping experience is almost completely the same until they hit the check out point. We say almost the same as Buy Now Pay Later has been proven to increase sales and so customers may just well spend more time browsing after discovering BNPL is an option.

TIP: This is why it’s usually a good idea to advertise on the home page and product pages that you offer BNPL so that customers are aware whilst browsing.


When a customer hits the checkout, they are presented with the payment options as normal, but with the additional option to spread the cost through the BNPL provider.

If the customer wants to pay by spreading the cost, they’ll need to select the Buy Now Pay Later option. It’s worth noting that at this point, the interest free payment options aren’t approved. Customers need to go through certain checks to obtain credit – though they are nowhere near as vigorous as other forms of unsecured lending. From time to time, some vendors will conduct hard credit checks, but 9 times out of 10, the vendor only performs a soft credit check or asks for ID verification.

The beauty of Buy Now Pay Later in ecommerce web design is that at this stage, the approval is usually almost instant. With fast approval behind them, the customer now has the option to select the terms of payment – i.e., the term and payment amount.

Most merchants offer the same options, with typical instalments being:

  • Pay in 3 (three split payments within 3 months)
  • Pay in 6 (six split payments within 6 months)

For larger, more expensive items, terms are often as follows:

  • 12 Month Split
  • 24 Month Split
  • 36 Month Split


Offering Buy Now Pay Later as a payment option is, as we discussed prior, an automated thing. However, there are certain things eCommerce merchants need to know about what happens when a customer purchases from their store using this payment method.

The biggest difference and probably the only difference if we’re being honest is that the BNPL provider will pay the amount spent by the customer directly to the merchant, minus the agreed fees. The payment instalments aren’t collected by you as a merchant. They are in fact collected by the BNPL provider.

As we said, it’s pretty straight forward, right?


Not to appear biassed but Buy Now Pay Later as a payment option is an extremely beneficial thing to offer as a merchant.

Not only was it found to account for around 2.1% of all global e-commerce transactions in 2020, but it’s predicted that by 2024, it will account for a massive 4.2% of global e-commerce sales.

The reason for this is that there are multiple benefits to both the merchant and the customer. It’s a WIN WIN all round.

Let’s explore.


If you’re an employer, you’ll be familiar with the shift in demand for increased flexibility across all areas of life. Well, it’s no different outside of employment. As a population, we value our ability to make decisions for ourselves and therefore, demand flexibility. That’s why eCommerce merchants need to be responding with a variety of payment options, thus providing the ultimate flexibility.

It used to just be enough to allow payment via credit card, but credit card use is in fact declining. Shoppers have got wise to the high interest rates charged and with the cost of living increasing massively, they are no longer prepared to pay it.

In truth, the rising cost of living is making everyone more conscious about their spending habits and their financial position. This consciousness also spills over into their credit rating. Shoppers don’t want to be doing anything that will negatively impact their credit score. The beauty of BNPL is that, as we mentioned, most providers only perform soft credit checks, which won’t appear on or impact their credit file.


Buy Now Pay Later is extremely beneficial for eCommerce websites, particularly those looking to grow. And here’s why.

It attracts a wider audience

Buy Now Pay Later has become popular amongst younger generations – millennials and Gen Z. Perhaps it’s down to the increased cost of living, lower wages or less time to build up savings. Either way, they love it.

So, if you’re actively trying to target a younger audience with your products, the likelihood is that if you don’t offer BNPL as a payment option, they won’t be purchasing.

Beyond attracting a younger audience, offering Buy Now Pay Later as a payment option allows you tap into audiences who wouldn’t normally purchase from you due to budgets.

Some key statistics:

It provides a better customer experience

Every eCommerce merchant knows the customer likes to feel understood. That’s why personalisation across all areas of eCommerce is so huge right now.

With payment options, it’s no different. Your customers want to know you are aware of the current economic climate and how this is affecting their ability to purchase certain things.

By offering ‘Buy Now Pay Later’ as an option, you’re in essence saying “Hey, I know costs are increasing, so I’ve made it easier for you to pay for the things you either need or want.” If that’s not a way to show them you care, then we’ll eat our hat.

Some key statistics:


One of the most common reasons a customer abandons their cart is the cost of the items. However, research has shown that when BNPL options are provided, customers are more likely to purchase the items in their basket.

This is particularly true when it comes to more expensive items. 45% of BNPL customers have stated they’ve used the option to make purchases that they wouldn’t have considered would ordinarily be affordable due to their monthly surplus income.

Some key statistics:

According to a recent RBC Capital report, offering a buy now, pay later option to your customers can increase conversion rates by 20-30%.


As we said from the start, some of the industry chatter has led to rumours. Here we debunk some of that chatter.

“The merchant charges the customer interest”

Wrong. In fact, quite the opposite occurs. Merchants are actually charged to offer BNPL to their customers, meaning they basically pay any fees on behalf of the customer.

“Buy Now Pay Later is unethical”

Truth be told, it’s an industry wide debate. Whilst in theory, it’s far from unethical as a concept, there’s the obvious argument that it encourages debt. That being said, Buy Now Pay Later is one of the forms of credit which highly favours the customer.

  • Short lending terms
  • No interest
  • Soft credit check
  • Manageable payments
  • Only available as a one-time limit

Many are pushing for Buy Now Pay Later to be regulated. Perhaps as its popularity increases, this could be the solution to ethical offering.

“It’s cheaper for the merchant than allowing the use of credit cards”

Truth be told, the transaction fee which merchants have to pay when a customer uses a credit card is lower than the fee deducted during a Buy Now Pay Later purchase. However, as we’ve established, customers much prefer BNPL over credit card payment, further reinforcing how merchants are going above and beyond to satisfy them.


Let’s face it, there are tons of Buy Now Pay Later providers on the market, with new ones emerging all the time. This makes deciding which one to invest in just that little bit harder.

Let’s explore some of the most popular providers on the market:


Klarna is one of the most well known providers on the market, mainly due to its huge media presence.  The firm markets itself to merchants as the provider to help them financially empower their shoppers.

Klarna works in much the same way as other Buy Now Pay Later providers in that customers can purchase your products interest free over a period of three months.

The difference with Klarna is that its marketplace availability only spans the UK, unlike other BNPL providers which work across the globe.

Furthermore, as a merchant, you must enter into a partner agreement for a minimum of 36 months.


LayBuy was founded in 2016 and now claims to be one of the three biggest providers in the Buy Now Pay Later marketplace.

Like many, it offers interest free payments to customers and is easily integrates with Magento 2 development. The difference being that payments are made by customers in six instalments, over six weeks, with the first payment being due on purchase.


Customers have been using paypal for years to purchase their goods – mainly because of the security it provides when paying online. In recent years, responding to customer’s demand for flexibility, Paypal has launched Pay In 3 as part of PayPal checkout.

Basically, with Pay in 3, your customers can pay over time for your products, without being charged interest. You get paid for the goods up front and your customers pay PayPal in instalments.
Having supported the integration of BNPL for multiple ecommerce businesses, we’ve become fond of two particular providers, Shophumm and Clearpay – so much so, that we’ve made them official partners.



humm has been offering customers a responsible and trusted way to pay for over 30 years. There are now more than 2.7 million users across the United Kingdom, Ireland, Australia, New Zealand and Canada. WOW!

Why is humm so popular? Well their super flexible way for consumers to make important life purchases is a big contributor. Who wouldn’t love a provider that allows the cost of an item to be split into more affordable instalments, over a longer period of time? Those who ‘humm’ get a choice of interest-free and flexible plans – with the maximum value standing at £30k and terms ranging from 10 weeks to 6 years!

Beyond the flexibility, humm is also right by the customer’s side no matter the purchase – whether it’s a new sofa or a new smile, they do the big, the boring, the small and the sweet. To put it simply, their mission is to make life more affordable for everyone.

The beauty of humm is that whilst they provide a variety of integrations for platforms such as PrestaShop and Magento, they also have an API you can connect to directly if you have a custom platform.


Clearpay is a Buy Now Pay Later marketplace which enables merchants like you to give your customers the opportunity to spread the cost of your items over 6 weeks – customers make just 4 interest free payments during this period.

Clearpay prides itself on being the UK’s largest online Buy Now Pay Later marketplace. In total, it has a whopping 19m active global users. The firm claims this is due to no interest fees and zero application fees.

We think both Clearpay and Humm are AWESOME!


The most popular way to offer Buy Now Pay Later through your Magento 2 site is to use an extension. These extensions work like plugins and allow for payment options provided by your BNPL provider to be integrated.

For example, payment extensions like Clearpay, Shophumm and Klarna BNPL offer BNPL to be added to the checkout phase.

Not sure where to look for the best extension for your site? Most extensions can be found on via the links below;

Note, there are sometimes purchase fees involved with some of the free extensions. Always check when signing up and assess whether there is a more suitable provider before you pay.

Want to take things a step further? Our partners at OneStepCheckout have developed a specific extension to replace the default checkout, focusing entirely on improving checkout conversion.

How? By addressing the key reasons for cart abandonment.

The best bit is, the OneStepCheckout extension for Magento 2 works out-of-the box with all the major BNPL providers around the world too!


At Foundation Commerce, we’re big fans of one particular extension that works well with our partner BNPL providersOptty.


Well, it ticks the box for both us as a Magento development agency and more importantly, provides huge benefits to the merchant:

  • Allows for enabling and disabling tons of BNPL providers at the click of a button with zero input from developers – reducing the need for extra investment.
  • Allows for A/B testing different BNPL providers to determine which is the better performer at checkout stage
  • Allows widgets to be dropped into multiple areas of the site to showcase different BNPL providers on offer.

The beauty is, Optty also only charges a very small transaction fee on top of the BNPL providers fee – maximum of $0.35 per transaction and this reduces depending on the volume – which is a win win! And, it even works together with OneStepCheckout.


Cotton:On chose to use Optty due difficulties with the integration of BNPL applications. Recognising they needed to find a solution that would not only improve the background process for the team, but also the customer experience, they made the decision to demo the integration software.

For Cotton:On, a five day integration effort has become five minutes!

Before Optty, integrating new BNPL applications was a difficult and lengthy process. Now we have a platform that allows us to almost instantly add BNPL providers to our system, which means we can give our customers more choice and flexibility. And the platform allows us to make informed decisions and provide a better experience for our customers. A five day integration effort per BNPL has become 5 minutes.

Brendan Sweeney, Group General Manager

View the full case study here.

The Optty integration can be installed via the Magento marketplace. Link below;


Merchant Transaction Fee – The fee the merchant agrees to pay to the provider when a sale is made using Buy Now Pay Later. This is typically between 2 and 8%.

Consumer Interest Loan – This is the interest rate applied to the purchase at the point of the transaction. It’s very uncommon for this to be implemented on short term Buy Now Pay Later purchases as they are usually interest fee.

Payment Method – The method customers use to pay for product purchases in your ecommerce store. Examples are gift cards, credit cards, debit cards and Buy Now Pay Later.

Payment Gateway – The third-party service that enables online stores to process credit card payments. Its task is to collect, validate, encrypt and transfer customers’ financial information.

Payment Processor – This is the institution that processes the transactions after receiving a request from the payment gateway.

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