Shopify glossaryGlossary5 min read
What Is Buy Now, Pay Later (BNPL)? Should Your Shopify Store Offer It?
Buy now, pay later lets shoppers split an order into installments while you get paid upfront. Here is how it works, what it costs a store, and when it is worth adding to your Shopify checkout.
Key takeaways
- Buy now, pay later (BNPL) lets a shopper split an order into installments, while the store is paid the full amount upfront, minus a fee.
- Shopify's built-in option is Shop Pay Installments, for stores in the US, Canada, the UK and Australia (early access). It needs Shopify Payments and Shop Pay.
- The provider carries the repayment risk. With Shop Pay Installments, Affirm collects from the shopper, so a missed installment isn't your loss.
- BNPL is regulated credit in Australia since 10 June 2025 and in the UK since 15 July 2026. The rules fall on the lender, not the store.
- Who it is for
- Stores weighing pay-later options
- Time needed
- 5 minutes to read
- What you need
- Your average order value
Buy now, pay later (BNPL) is a short-term credit option at checkout that lets a shopper split a purchase into smaller payments, usually four interest-free installments every two weeks, or monthly payments with interest on bigger orders. The store receives the full order amount upfront, minus a fee, and the BNPL provider collects the installments.
Most people who search the term are shoppers. This entry is for store owners deciding whether to offer it. I checked the Shopify settings and the UK and Australian rules on the official pages on 7 November 2026.
How buy now, pay later works
- The shopper picks it. At checkout they choose the BNPL option instead of paying in full by card.
- The provider decides. The BNPL company checks eligibility and approves or declines the plan in seconds.
- You get paid. The provider pays you the order total minus its fee. With Shop Pay Installments, that lands in 1 to 3 business days after capture, inside your normal Shopify Payments payout.
- The shopper repays the provider. Late payments are between them. You aren't chased for the money.
- Refunds still go through you. You refund the order, and the provider adjusts the shopper's plan.
The plans depend on order value. These are the US plans for Shop Pay Installments:
| Plan | Order value | Interest |
|---|---|---|
| 2 payments, every 2 weeks | $35 to $50 | Interest-free |
| 4 payments, every 2 weeks | $50 to $999.99 | Interest-free |
| Monthly, 3 to 24 months | $150 to $30,000 | 0% to 36% APR |
What it costs a store: a worked example
Shopify doesn't publish one Shop Pay Installments rate for every store, so the fee below is an assumption to show the maths. Use your own rate from your admin.
A $200 order at a 40% gross margin
- Extra fee per BNPL order$6Assumes BNPL costs 3 points more than a card payment.
- Gross profit per extra sale$80$200 at a 40% margin, before the payment fee.
On those numbers, BNPL pays for itself if about 1 in every 13 BNPL orders is a sale you wouldn't have made otherwise. On a $400 jacket that's a low bar. On a $20 phone case the option often doesn't show at all, because the order is below the minimum.
Buy now, pay later on a Shopify store
- Shop Pay Installments. Go to
Settings > Payments, click Manage in the Shopify Payments section, switch on Shop Pay Installments and save. Your rate is underSettings > Payments > Shopify Payments > Manage > Manage payment methods > View payment rates. - Klarna and Scalapay. These are local payment methods inside Shopify Payments in a range of European countries.
- Afterpay, Clearpay and other providers. These connect as third-party payment apps, so Shopify's transaction fee of 2%, 1%, 0.6% or 0.2% (by plan) applies on top of the provider's fee.
My guide to setting up buy now, pay later on Shopify walks through each one, and the Afterpay vs Klarna comparison helps if you're choosing between providers.
By country
- US: Shop Pay Installments covers $35 to $30,000. Afterpay is the main alternative when your shoppers already use it.
- UK: the FCA started regulating deferred payment credit on 15 July 2026, where the lender and the seller are different businesses. The FCA says broking of these agreements is exempt, so the duties sit with the lender. Shop Pay Installments offers three interest-free payments from £50 to £999.99, with the first paid at checkout. Afterpay trades as Clearpay here.
- EU and the Netherlands: Klarna through Shopify Payments is the usual choice. iDEAL | Wero is a bank payment, not a pay-later method.
- Australia: since 10 June 2025, BNPL providers need an Australian credit license. Shop Pay Installments is in early access for orders from A$50 to A$30,000 and accepts debit cards only. My guide to Afterpay on Shopify in Australia covers the local favorite.
Common misconceptions
- "I carry the risk if they stop paying." You don't. Affirm is responsible for collecting Shop Pay Installments payments, and other providers work the same way.
- "It's free for the shopper, so it's cheap for me." The fee is higher than a card payment, and the Shop Pay Installments fee isn't returned when you refund.
- "Store credit is a fine refund." A gift card or store credit refund doesn't change the shopper's plan, so they still owe every remaining installment. Refund to the original payment method.
- "More logos sell more." Each extra option crowds the checkout. One or two that your customers already use is usually enough.
Related terms
- Shop Pay: the saved checkout that Shop Pay Installments runs on.
- Payment gateway: how third-party BNPL apps connect to your checkout.
- Chargeback: card disputes, which work differently from BNPL disputes.
- Average order value: the metric BNPL is usually meant to raise.
What to do next
- Check your average order value. If most orders sit under $50, BNPL will rarely appear, and the effort is better spent elsewhere.
- Pick one provider your customers know. Shop Pay Installments if you're on Shopify Payments in a supported country, Klarna in Europe, Afterpay or Clearpay where shoppers expect it.
- Show the installment price on product pages. The option does its work before checkout, when the price is the hesitation.
- Get a second opinion. I review checkouts and product pages as part of my Shopify CRO work, which starts from $500, and the first review is free.
Free tools
Check your own store
Free, no sign-up. Each one runs a part of this guide for you.
Frequently asked questions
What does buy now, pay later mean?
Buy now, pay later is short-term credit at checkout. The shopper splits the order into installments, often four payments two weeks apart, and the store is paid the full amount upfront by the provider, minus a fee.
Does buy now, pay later cost the store money?
Yes. The provider charges the store a fee that is higher than a normal card payment. With Shop Pay Installments, the fee includes the standard Shopify Payments processing fee and isn't returned if you refund the order.
Who pays if a customer misses a BNPL payment?
The provider does. With Shop Pay Installments you receive the full order amount within 1 to 3 business days of capture, and Affirm is responsible for collecting the installments from the shopper.
Which BNPL options work with Shopify?
Shop Pay Installments is built in for stores in the US, Canada, the UK and Australia (early access). Klarna and Scalapay are available through Shopify Payments in a range of European countries, and providers such as Afterpay and Clearpay connect as third-party payment apps.
Is buy now, pay later regulated?
In the UK, the FCA has regulated deferred payment credit from third-party lenders since 15 July 2026. In Australia, BNPL providers have needed an Australian credit license since 10 June 2025. In both cases the rules apply to the lender rather than the store.
Sources
- Shop Pay Installments, Shopify Help Center
- Shop Pay Installments customer experience, Shopify Help Center
- Getting paid with Shop Pay Installments, Shopify Help Center
- Regulating Buy Now Pay Later (BNPL), Financial Conduct Authority
- Buy now pay later credit contracts: Credit licensing, ASIC
Related services and work
I'm a Shopify developer and CRO specialist. I have built and improved Shopify stores since 2018, completed more than 1,000 projects, and hold a 4.96 average rating across 719 client reviews.
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