Buy Now, Pay Later: A Look at Some Popular BNPL Platforms
If you’ve watched television, visited a retail store, or shopped online in the past few years, you’ve almost undoubtedly heard about “buy now, pay later” or at least encountered one of the companies offering such options. Not only has the number of BNPL services grown in recent years but the number of consumers turning to these services has continued to climb as well. Yet, while the popularity of these platforms has risen, so has criticism of the practice.
So, what exactly does “buy now, pay later” entail and how do some of these services work? Let’s take a look at what BNPL is and what some of the top companies in the space offer.
What is Buy Now, Pay Later and What Companies Offer It?
“Buy Now, Pay Later” or “BNPL” is a financing option that allows consumers to pay off purchases over time via a set payment schedule. Most commonly, payoff programs are split into four payments. Typically, the first of these payments is due at the time of purchase (like a down payment) with the other three payments due two weeks after each other, for a total of six weeks. Assuming payments are made in full and on-time, BNPL financing often comes with no interest and few if any fees.
While those factors have made BNPL services popular among consumers, they’ve also led to scrutiny. First, some argue that the “buy now, pay later” concept itself encourages shoppers to buy things that they can’t really afford. Additionally, although those who make their payments as intended may not encounter fees or interest, critics warn that missing payments can result in expensive penalties and potentially set off a series of financial issues. Therefore, BNPL services should only be used responsibly and with caution.
Founded in Australia, Afterpay was acquired by Block (formerly Square) in 2022. With Afterpay, customers can finance purchases and pay them back over the course of six weeks, with one-quarter of the total due upfront and subsequent payments coming every two weeks. There are no fees or interest for Pay-in-4 orders, provided that customers make their payments on time. However, a late fee will be assessed for those who miss their payments. According to the app’s FAQ, there is typically a grace period of 10 days unless otherwise noted in the payment schedule and the total amount of late fees charged will not exceed 25% of the purchase prices. It should also be noted that Afterpay offers a Pay Monthly option that does charge interest.
While Afterpay allows customers to pay in-store using a digital card via mobile wallets, the regular Afterpay Cards can only be used at select retailers that accept the service. However, the company is also rolling out the Afterpay Plus Card, which can be used to finance purchases from nearly any store that accepts Mastercard and mobile payments. The Afterpay Plus card does come at a monthly fee of $5.99.
Formerly known as Quadpay, Zip is another Aussie export. Off the bat, one aspect of Zip that makes it stand out (and not in a great way) is its convenience fee. Currently, it looks as though the company charges fees of $4 for purchases from $35 to $99.99, $5 for purchases from $100 to $199.99, and $6 for purchases of $200 or more. On top of that, late fees start at $7.
The newest feature to come to Zip is the Zip Card, which is currently rolling out. Issued by WebBank, this card gives customers financing options at more retailers. At this time, those interested in the Zip Card can join the waitlist on the company’s site.
Also hailing from abroad (although not Down Under this time), Klarna is a Swedish brand that’s made a name for itself stateside. Like the others we’ve looked at, the service offers a variety of payment options, ranging from “pay now” to “pay over time.” Nevertheless, the Pay in 4 option is their most popular, with the feature carrying no interest and no fees when customers pay on time.
Beyond its core product, Klarna has introduced a number of other features over the years. For example, the platform has a price comparison tool where consumers can search for items and look at deals across multiple sites. Meanwhile, back to their BNPL efforts, the company recently launched its Klarna card, which enables Pay in 4 plans on all purchases. However, the card does come at a cost of $4.99 per month.
Founded in the U.S. more than a decade ago, Affirm is another well-known buy now, pay later platform that has partnerships with the likes of Walmart and Amazon among others. Beyond that, the company also allows customers to finance purchases at nearly any retailer using either their Pay in 4 or monthly payments option. With the former, there is no interest or fees. As for the monthly payment option, customers will be able to choose between six and 12-month plans but will be subject to interest.
Affirm is also in the process of rolling out its Debit+ card. With this option, customers will be able to make purchases wherever Visa is accepted and decide whether to pay upfront or split it up. Currently, Debit+ is “available to select shoppers.”
Although PayPal may best be known as an online payment platform, the company has since expanded into a number of different areas — including the realm of BNPL. With their Pay in 4 plan, customers can finance purchases of between $30 and $1,500 with no interest and, notably, no late fees. For whatever reason, this service is not available to residents of Missouri, Nevada, or New Mexico. Alternatively, the FinTech also offers financial plans of six, 12, or 24-months. While these options do carry interest, they also boast no late fees. This Pay Monthly option is not available to those in Alaska, Colorado, Hawaii, Massachusetts, Nebraska, Nevada, New York, or Texas.
One downside to PayPal’s Pay in 4 option as it stands now is that it can only be used for online purchases — and specifically for retailers that accept PayPal. Of course, that’s still a pretty wide net. Plus, given PayPal’s strong reputation, it’s easy to imagine that some shoppers would be drawn more to this option than others.
Finally, while Apple hasn’t yet entered the BNPL fray, they have announced plans to. Dubbed Apple Pay Later, the upcoming service will enable Apple Pay customers to finance purchases. Per the status quo, purchases will be paid via four payments made over six weeks, with no interest or fees. This new feature will be built into the Wallet app, which is where users can then manage their purchases and payments.
According to Apple, this new feature will utilize the Mastercard network. Furthermore, it does not require any merchant integration. Therefore, it seems as though Apple Pay Later will compete with the likes of the Klarna Card, Zip Card, and Afterpay Pay Plus card — but likely without any monthly fees. However, with the offering not yet available, we’ll need to wait for all of the details.
Regardless of whether or not the “buy now, pay later” concept is one that’s beneficial to consumers, the popularity of these services cannot be denied. In fact, with companies such as PayPal and Apple now jumping on board, the sector seems set for even greater adoption. Ultimately, while many of these services offer similar features and functionality, there are some small differences — including pros and cons — that consumers should be aware of before making their first purchase. Furthermore, above all else, shoppers should be sure to have a repayment plan in place so that they don’t run into the late fees that some of these services charge.
But will the BNPL revolution continue — even after possible regulatory intervention? That remains to be seen. In the meantime, consumers will need to make their own decisions about buy now, pay later and assess the risks for themselves.