Should your business offer Buy Now, Pay Later?
Buy Now, Pay Later moves the instalment loan to checkout: the provider pays the merchant up front (minus a fee of roughly 2 to 8 percent), assumes the consumer credit risk, and collects from the shopper in slices. Merchants adopt it because it verifiably lifts conversion and average order values, especially on discretionary purchases over $100; the honest ledger also includes the fee premium over cards, checkout clutter and a customer relationship partly intermediated by the BNPL brand.
Scope: For retailers and e-commerce operators weighing BNPL against its fee premium, and for anyone tracking where instalment payments fit in Canada.
What BNPL actually is, mechanically
At checkout, the shopper picks the instalment option, four biweekly payments is the classic shape, and the BNPL provider makes an instant credit decision. Approved, the provider pays you the full order amount, minus its merchant fee, on your normal settlement cadence, and takes over collecting from the shopper. Missed instalments, defaults and the entire consumer credit exposure belong to the provider, not to you.
In effect you are selling the receivable at a discount in exchange for a certain, immediate sale. That framing keeps the analysis honest: the merchant fee is not a processing cost, it is the price of conversion lift plus outsourced credit risk, and it should be judged against exactly those two things.
The case for it: where the lift is real
The evidence across retail is consistent in direction: offering instalments raises checkout conversion and average order values, with the effect concentrated where the purchase is discretionary, the ticket exceeds roughly $100, and the buyer skews younger. Furniture, electronics, fashion, sports equipment, wellness services: shoppers who would hesitate at $400 today click comfortably at four payments of $100.
The mechanism is affordability psychology rather than mathematics; the shopper's total is unchanged, but the framing moves the decision. For merchants in the sweet-spot categories, tickets grow, abandonment falls, and BNPL's own marketing surfaces can add discovery traffic. For groceries, low tickets and B2B, the lift barely registers, and the fee premium buys nothing.
The honest ledger: fees, clutter and the relationship
The merchant fee is the headline cost: BNPL providers commonly charge several times card interchange, generally landing in a 2 to 8 percent band depending on provider, category and volume. A retailer at a 30 percent gross margin paying 5 percent for BNPL is spending a sixth of gross margin on the payment method, which only works if the incremental sales are genuinely incremental.
The quieter costs deserve their own lines. Checkout clutter: every added button costs a sliver of clarity, and BNPL brands promote themselves on your payment page. Relationship intermediation: the shopper's repayment experience, including any late-fee friction, wears the BNPL brand next to yours. Returns get more complicated when a refund must unwind an instalment schedule. And dependency risk: terms that were subsidized during BNPL's land-grab era have been repriced before and can be again.
None of these kill the case in the right category; all of them belong in it.
Regulation, alternatives and the sensible posture
Regulators in the UK, US, Australia and elsewhere have moved to treat BNPL as the consumer credit it functionally is, affordability checks, disclosure standards, complaint rights, and Canadian authorities have studied the sector with the same direction of travel. None of that threatens merchants directly, but it shapes the providers' costs and approval rates, and argues for treating BNPL as one configurable option rather than a structural dependency.
Note also the adjacent alternatives. Card networks and issuers increasingly offer instalment conversion on ordinary credit card purchases, the shopper splits the charge on their existing card, at normal card economics for the merchant. And for service businesses, deposit-plus-balance or milestone structures deliver instalment psychology with no third party at all.
The sensible posture: if your category matches the sweet spot, trial BNPL as one payment option, measure incremental conversion and basket size against the fee for a quarter, and keep your checkout provider-agnostic so the option remains an option. RapidCents checkout supports instalment providers alongside cards, wallets and bank payments, with reporting that shows each method's share and cost, which is exactly the data the quarterly review needs.
Frequently asked questions
What does BNPL cost the merchant?
A per-transaction fee typically ranging from about 2 to 8 percent depending on provider, category and negotiated volume, versus roughly 1.5 to 3 percent for cards. The merchant is paid in full up front; the fee is the price of conversion lift and outsourced consumer credit risk.
Who takes the loss if the shopper doesn't pay?
The BNPL provider. The merchant is settled up front and carries no repayment risk; missed instalments are between the provider and the consumer. Returns and disputes still involve the merchant as with any sale.
Does BNPL actually increase sales?
In the right categories, measurably: discretionary purchases over roughly $100 show higher conversion and larger average orders when instalments are offered, with the strongest effects among younger shoppers. On small tickets and essentials the lift is minimal, and the fee premium buys little.
Is BNPL regulated in Canada?
The sector has been under active regulatory study, and the international direction, treating BNPL as consumer credit with affordability and disclosure rules, is clear. For merchants the practical implication is provider-side: keep BNPL as a configurable option rather than a dependency as the rules settle.
Are there instalment options without BNPL fees?
Increasingly, yes: issuer and network instalment programs let shoppers split ordinary credit card purchases while the merchant pays normal card rates, and service businesses can structure deposits and milestone payments directly. Pricing these against BNPL's fee is the first analysis worth doing.
