Guides
Buy now pay later for merchants: how BNPL works and what it costs
Buy now pay later (BNPL) lets a shopper pay later or in instalments, while the merchant is usually paid the full amount upfront by the BNPL provider, minus a fee. The provider checks the shopper, collects the instalments and usually carries the repayment risk.
At a glance
| What BNPL is | Short-term credit at checkout: the shopper pays later or in instalments while the merchant is paid upfront by a BNPL provider |
|---|---|
| Who pays the merchant fee | The merchant pays the BNPL provider through a transaction fee, not the shopper on typical short plans |
| Who carries credit risk | On approved orders the BNPL provider carries non-payment risk; delivery disputes stay with the merchant |
| Common models | Pay in 30 days (invoice), pay in 3 or 4 instalments, and longer financing plans |
| EU regulation | Directive (EU) 2023/2225 (CCD2); member states had to transpose it by 20 November 2025; rules apply from 20 November 2026 |
| UK regulation | The FCA has regulated deferred payment credit since 15 July 2026 (PS26/1); providers need authorisation and affordability checks |
What is buy now pay later and who pays for it?
This guide looks at BNPL from the merchant's side: which models exist, how an order moves from checkout to payout, how pricing is structured, what changes under EU and UK rules, and how to run BNPL next to cards and bank payments.
BNPL is short-term credit offered to the shopper at checkout, and the merchant pays for it through a fee to the provider. The shopper usually pays no interest on short plans; the provider earns from the merchant fee and, on some products, from late fees or interest on longer financing.
Three models cover most of the European market:
- In all three models the merchant does not lend money. The provider pays the merchant and collects from the shopper. Deferral periods, instalment counts and order limits differ by provider and country, so check them in the provider's terms before launch.
| Model | How the shopper pays | When the merchant is paid |
|---|---|---|
| Pay in 30 days (invoice) | One payment after a deferral period | Upfront by the provider, on its payout cycle |
| Pay in 3 or 4 | Equal instalments over a few weeks or months | Upfront by the provider, on its payout cycle |
| Financing | Monthly instalments over a longer term, sometimes with interest | Upfront by the provider, on its payout cycle |
How does BNPL work for the merchant, step by step?
To your systems a BNPL payment works like a redirect or embedded payment method: the shopper is checked by the provider, the order is authorised, and you are paid after capture.
What does BNPL cost merchants?
BNPL is usually priced as a percentage of the order value plus a fixed fee per transaction, and it is typically more expensive for the merchant than a card or bank payment. The higher price reflects the credit risk, fraud risk and cost of interest-free instalments that the provider carries.
What drives the price:
We do not quote provider rates on this page. Rates are rarely public, change often and depend on the contract. Ask each provider for a written offer on your own mix of countries, categories and basket sizes.
- Model. Invoice products, short instalment plans and longer financing are often priced differently.
- Category and risk. Providers price by product category, average basket and expected return rate.
- Volume. Larger merchants negotiate individual rates; many providers do not publish a price list.
- Refunds. Check whether the fee is returned on refunded orders. Under many contracts it is kept.
What are the pros and cons of BNPL for online retailers?
BNPL is worth its fee where it changes buying decisions, and it costs margin where it does not. Treat it as a per-category calculation, not a yes-or-no for the whole shop.
Many merchants show BNPL only above a minimum basket amount, where the fee is easier to cover.
- You are paid upfront, and the provider carries non-payment risk on approved orders.
- It can raise basket size and conversion for higher-ticket goods. Measure this on your own data rather than relying on provider studies.
- Invoice payment fits markets where shoppers expect to pay after delivery.
- The fee is higher than for cards or bank methods and is often kept on refunds.
- Refunds reverse payouts from later settlements, which makes reconciliation harder.
- Every order needs the provider's approval, so some shoppers are declined at the last step.
- Providers restrict some product categories.
- In the UK, third-party BNPL has been regulated consumer credit since 15 July 2026; in the EU, the CCD2 rules apply from 20 November 2026. Both bring disclosure duties for providers and advertising rules that affect how you present BNPL.
B2B buy now pay later: how is it different?
B2B buy now pay later gives business buyers invoice terms, often 30 days or longer, while the seller is paid upfront by the provider. The provider checks the buying company, not a consumer, and takes on the risk that the company does not pay.
Key differences from consumer BNPL:
- Checks. The provider looks at company data and, in some cases, the person ordering on behalf of the company.
- Terms. Longer payment terms and higher order amounts than consumer products.
- Regulation. Credit to businesses sits outside consumer credit law, so consumer rules on disclosure and withdrawal do not apply in the same way. In the UK this does not cover sole traders, small partnerships and unincorporated associations (two or three partners, not all of whom are bodies corporate): they count as individuals or relevant recipients of credit, so deferred payment credit to them can fall under FCA rules unless an exemption applies, for example business-purpose credit over £25,000 (RAO art. 60C) (Regulated Activities Order, art. 60L, art. 60C, checked 23 Oct 2026; FCA PS26/1).
- Process. B2B buyers expect purchase order numbers, VAT details and invoices that match their accounting.
How is BNPL regulated in the EU and the UK?
In the UK, most third-party BNPL (deferred payment credit) has been regulated by the FCA since 15 July 2026. In the EU, Directive (EU) 2023/2225 brings most of it into regulated consumer credit from 20 November 2026. The rules fall mainly on the BNPL provider, but they change what merchants show at checkout and in advertising.
European Union. The previous Consumer Credit Directive exempted interest-free credit, very small amounts and short deferrals, which kept much of BNPL out of scope. Directive (EU) 2023/2225 (CCD2) removes most of those exemptions. Member states had to transpose it by 20 November 2025, and the rules apply from 20 November 2026 (source: EUR-Lex, Directive (EU) 2023/2225). For providers this means pre-contractual information, a creditworthiness assessment and a right of withdrawal for the shopper. Some interest-free deferred payment offered by the merchant itself may stay exempt under conditions set in the directive; check national transposition with a legal adviser.
United Kingdom. The FCA regulates interest-free deferred payment credit, the UK term for most third-party BNPL. Providers need FCA authorisation and must carry out affordability checks, and shoppers gain access to the Financial Ombudsman Service (source: FCA policy statement PS26/1 on Deferred Payment Credit, published 11 Feb 2026; regulation from 15 July 2026). Merchants that only present a provider's product at checkout are generally not the regulated party, but should confirm this for their own setup.
What this means in practice for a retailer:
- Review BNPL mentions in ads and on product pages against the provider's guidance.
- Show the provider's information before the shopper confirms the plan.
- Do not pre-select BNPL at checkout.
- Expect approval rates to change as providers adjust their checks.
Direct BNPL contract or through one integration?
You can sign directly with each BNPL provider or connect providers through a payment orchestration platform; both are common. The contract with the BNPL provider exists in both cases. What changes is how many integrations you build and maintain.
A merchant with one main market and one provider may not need an extra layer. A merchant selling in several countries often needs a different BNPL provider per market, and that is where one integration saves work.
| Criterion | Direct contract and integration per provider | Providers connected through one orchestration integration |
|---|---|---|
| Contract | Signed with each provider | Still signed with each provider |
| Integration | One integration per provider | One integration; providers sit behind it |
| Fees | Negotiated with each provider | Negotiated with each provider |
| Checkout | Provider SDKs and widgets, placed by you | Methods shown in one checkout, filtered by country and amount |
| Refunds | Through each provider's API or portal | Through one refund flow for all methods |
| Reporting | Separate dashboards and exports | Payment data in one place, provider data still in each portal |
| Adding a market | New integration project | New provider connection and routing rule |
How do you offer BNPL next to cards and bank payments with OrsunPay?
OrsunPay is payment orchestration software that lets you show BNPL methods next to cards and bank payments in one checkout, using provider accounts you hold. OrsunPay is a payment orchestration platform that connects you to licensed PSPs; it does not process or hold funds itself.
How it works:
See payment orchestration for how the platform works, or the guide to alternative payment methods and payment processing fees for context.
- You keep your own contracts with BNPL providers and payment providers. OrsunPay connects you to licensed PSPs and acquirers.
- BNPL methods appear in hosted checkout and payment links next to cards, SEPA Direct Debit, iDEAL and Pay by Bank.
- You choose which connected BNPL provider to offer in each market, and routing rules show the right method by country, currency and basket amount.
- Refunds run through one flow for all methods.
- Fees, approval decisions and payouts stay between you and the provider.
How does BNPL work for the merchant, step by step?
- Offer the option The checkout shows the BNPL method only when the shopper's country, currency and basket amount are within the provider's limits.
- Check the shopper The shopper is redirected to the provider or fills in an embedded form. The provider runs its credit and fraud checks and approves or declines in real time.
- Authorise the order The provider returns an authorisation. You can prepare the order, but the shopper's repayment schedule has not started yet.
- Capture at shipment When the goods ship, you capture the payment. Most providers start the invoice period or instalment schedule from the capture date, so capturing early and shipping late creates disputes.
- Receive the payout The provider pays the order value minus its fee on its payout cycle and collects from the shopper itself.
- Handle refunds A full refund cancels the plan; a partial refund reduces what the shopper still owes. Refunds are usually netted against later payouts.
Frequently asked questions
What does buy now pay later mean?
Buy now pay later means the shopper receives the goods now and pays later, either in one payment or in instalments. A BNPL provider pays the merchant and collects from the shopper, usually without interest on short plans.
How does buy now pay later work for an online shop?
The shop adds BNPL as a payment method, the provider approves the shopper at checkout, and the shop is paid by the provider after capture, minus a fee. The provider then collects the instalments or the invoice from the shopper and handles reminders.
Who pays if the customer does not repay a BNPL purchase?
On an approved order, the BNPL provider carries the loss, not the merchant. The merchant can still lose the payout if a shopper disputes the order, for example for goods not received, and the merchant cannot show proof of delivery within the provider's deadline.
How do refunds and partial returns work with BNPL?
A full refund cancels the shopper's plan and is deducted from a later payout to the merchant. A partial refund reduces the remaining amount the shopper owes. Check in the contract whether the provider keeps its fee on refunded orders.
Is buy now pay later regulated in the EU?
In the EU, from 20 November 2026: Directive (EU) 2023/2225 (CCD2) had to be transposed by 20 November 2025 and applies from 20 November 2026. In the UK, the FCA has regulated deferred payment credit providers since 15 July 2026 (FCA PS26/1). The duties fall mainly on providers, while merchants need to present BNPL correctly at checkout and in advertising.
Can I offer more than one BNPL option at checkout?
Yes, and merchants selling in several countries often do, because BNPL providers differ by market. Use rules by country and basket amount so each shopper sees one or two relevant options rather than a long list.
When does the merchant receive the money from a BNPL order?
The merchant is usually paid by the BNPL provider after the order is captured, on the provider's payout cycle. Payout timing differs by provider and contract, so confirm it in writing before launch.
Does buy now pay later increase chargebacks or disputes?
BNPL payments do not use card chargebacks, but providers run their own dispute process. A shopper can open a dispute, for example for goods not received, and the merchant must answer with proof of delivery within the provider's deadline.
What changes for BNPL in the UK?
In the UK, interest-free deferred payment credit has been regulated by the FCA since 15 July 2026. Providers need authorisation and must check affordability, and shoppers have access to the Financial Ombudsman Service (source: FCA PS26/1, published 11 Feb 2026; regulation from 15 July 2026).
Can B2B companies offer buy now pay later?
Yes. B2B BNPL providers give business buyers invoice or instalment terms while the seller is paid upfront, and credit to companies sits outside consumer credit law. In the UK, sole traders, small partnerships and unincorporated associations are not covered by this business carve-out, so credit to them can be regulated unless an exemption applies (RAO arts. 60L, 60C, checked 23 Oct 2026).
Is "pay in 30 days" the same as buy now pay later?
Yes, pay in 30 days is one BNPL model. The shopper pays one invoice after the deferral period instead of instalments, and the provider pays the merchant upfront.
Does BNPL work for subscriptions or recurring payments?
Usually not in the same way as one-off orders. BNPL is built for single purchases split into instalments; for recurring charges, SEPA Direct Debit or stored cards are the more common choice.