Pressroom  /  How BNPL Works In Small And Midsized Retailers
June 23, 2022

How BNPL Works In Small And Midsized Retailers

The adoption of buy now, pay later (BNPL) by the world’s big retailers has been the stuff of headlines, as the likes of Target, Best Buy and Walmart rush to offer the popular payment method.

Not to be overlooked, however, is the spread of BNPL among smaller vendors. The continued embrace by consumers—particularly those from younger generations—of point-of-purchase lending is a reminder to these often independent operations that they can potentially gain from this adoption.

In the United States, for instance, a 2021 survey of more than 300 small and medium-sized retailers showed 28% of respondents already offer the payment option, which allows shoppers to pay for purchases over a number of weeks, generally without incurring fees or interest.

Why use BNPL?

Providing BNPL does more than just help vendors keep up with trends, though. Installment lending can benefit retailers of all sizes in a wide range of ways, not least by potentially boosting both customer loyalty and sales volumes.

Global research from RBC Capital Markets shows that customers spend more when BNPL is on offer, with basket sizes at such retailers 30% to 50% higher than at those without point-of-purchase lending.

The RBC report also said consumers presented with one or more BNPL options are 20%-30% more likely to complete a purchase instead of walking away. With rates of digital shopping cart abandonment running as high as 70%, according to some measures, any offering that makes shoppers more likely to go from browsing to buying is more than welcome in e-commerce circles.

There is even room to potentially garner more success by offering a range of options, should retailers decide to follow this path. According to data gleaned by Optty, a BNPL integration platform of which I am the founder, 16% of shoppers who use BNPL go with their third-choice provider after investigating two others. This makes it likely that these shoppers might make their purchases through a different site if they were restricted to just one.

BNPL providers take on potentially costly risks like fraud and nonpayment, which does mean fees for vendors. Generally, vendors can expect to pay between 2% and 8% of the purchase amount in fees.

The Future Of BNPL

Consumer enthusiasm for installment borrowing ballooned in the pandemic when people were unable or unwilling to shop in person. And while the Covid-19-driven digital shopping boom may slow a bit as the world returns to real-world store aisles, many BNPL providers have broadened their offering to real-life locations.

The inflation surge is also playing in BNPL’s favor. According to a survey from RFI Global, more and more consumers are using installment payments to help manage stretched budgets in the face of soaring energy costs.

According to a survey by, nearly 40% of those who use the Australia-based provider Sezzle—recently acquired by Zip—said BNPL helped them with their monthly budgeting.

All this points to a future where BNPL remains an option for consumers. According to the 2022 Global Payments Report from FIS, it was used in 2.9%—or $157 billion—of global e-commerce purchases last year. That share is expected to jump to 5.3% by 2025.


Given the broad trends, you can see why retailers across the size spectrum are curious about the BNPL club. But there are benefits that apply very particularly to smaller merchants.

For starters, point-of-sale lending can lighten the need for staff to process payments. It takes only seconds for consumers to pay with BNPL once retailers have completed the process of setting up, integrating and making available BNPL options.

Of particular value to small and midsized operations is the fact that, unlike old-style merchant-managed installment systems, BNPL providers put cash from purchases in the hands of retailers immediately. This can make a real difference to early-stage businesses with limited cash flow and reserves.

Some industry commentators also see major potential in the emerging area of BNPL for business, designed to help SMEs and startups better manage fluctuations in cash flow.

Weighing The Potential Impact Of Oversight

But growth inevitably brings new challenges. The rapid spread of BNPL, unregulated in most parts of the world, has the United States, the U.K. and Australia, among others, eying the possibility of tighter supervision.

The U.K.’s Financial Conduct Authority has worked with BNPL providers to clarify terms and conditions, and the government is mulling an industry oversight role for the FCA. In the United States, meanwhile, the Consumer Financial Protection Bureau issued an advisory to consumers on the pluses and minuses of the payment systems.

In Australia, the industry has taken matters into its own hands by introducing the BNPL Code of Practice, a voluntary code overseen by the Australian Finance Industry Association, or AFIA, and big industry players.

As authorities around the world consider further steps, I would like to sound a note of caution to regulators.

Small and medium enterprises (SMEs), many of which are retailers, are not only key economic drivers, they account for an estimated 60% to 70% of all jobs across the globe. The growing importance of BNPL to these major sources of employment and growth should give regulators pause as they look to tighten oversight.

With more consumers expecting access to BNPL, retailers at all phases of growth are increasingly considering or deciding to adopt BNPL.

Therefore, regulators would be wise to act with an eye to business impact as well as consumer balance sheets when considering where they go next on regulation.

After all, even the mightiest of today’s global retailers started off small.

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