Get access to exclusive updates, the latest news and the inside scoop 🍨

Get access to exclusive updates, the latest news and the inside scoop 🍨

The Options for Buy Now Pay Later Stores

The Options for Buy Now Pay Later Stores

28th July 2021
17 Minute Read

With the revelation that buy now pay later stores offer, the looming question is, what will consumers spend in 2021? Let’s take a look at how it all works:


Written by Madeleine

28th July 2021
17 Minute Read

A Guide for Buy Now Pay Later Stores 📖

Did you know that in 2019, consumers spent an estimated record high of $16.8 billion across Black Friday and Cyber Monday alone? Unsurprisingly, the unprecedented events of 2020 harmed the global economy, affecting everything from wages to job stability and global supply chains.

To say that the economic climate has faced a challenge since the beginning of the pandemic is an understatement, which is why shoppers have tightened their purse strings and businesses are considering how they can lower the price barrier for consumers by becoming buy now pay later stores.

After all, some business is better than no business and many Shopify merchants began to realise this back in the early months of 2020. So, what’s the solution?

Flexible payment options are a frictionless way to drive continued customer spending during uncertain economic climates, which means that buy now pay later stores are the merchants who are making it possible for customers to immediately indulge in new purchases while spreading out their payments over time.

With the revelation that buy now pay later stores offer, the looming question is, what will consumers spend in 2021 now that such services are on the loose? Well as we’re about halfway through the year, we can’t answer that question right here, right now, but what we can do is take a look at the new technologies that are making this payment option possible for consumers. So, without further ado, let’s take a look at how it all works:

How Do Buy Now Pay Later Stores work?

In simple terms, buy now pay later stores on Shopify implement solutions that are integrated into online checkouts to allow customers to pay for products in instalments, as opposed to one lump sum upfront. Even though the financial terms can (and will) vary between companies, each business will allow the customer to receive their purchase immediately, but the cost of the product/ service will be paid for overtime.

It’s an increasingly competitive space where buy now pay later stores are concerned because services such as; Klarna, Affirm, Shop Pay and Afterpay now all compete with each other alongside huge financial companies such as PayPal that are leaning towards offering similar services.

In some instances, financial instalments can be a money-saving route for consumers to walk down as opposed to using a credit card. This method charges a 17.14% annual interest rate on average. However, credit card companies and banking partners commonly offer similar instalment options of their own.

However, it should be noted that buy now pay later stores often thrive on their perceived advantages up against late payment fees issued by credit card companies, alongside the penalties, and compounding interest rates that are frequently dished out. So, let’s take a further look at the facts below:

Certain solutions for buy now pay later stores will display the total amount of interest owed by the customer, however, this is not true of all financial tools.

Some financial services will charge the consumer extra if they were to miss a payment deadline, whereas other services will provide the customer with the option of selecting a repayment plan that works well for them, decreasing the likelihood that they will miss a payment.

It should be noted that some companies will not charge interest if the product/ service is paid for in full within 6–12 months. Similarly, payments can be extended at a reduced annual percentage rate depending on the company at hand.

So, as you can see here, it’s all swings and roundabouts for buy now pay later stores when it comes to the different terms of each financial tool, which is why it’s important to read the fine print before choosing one for your Shopify store to partner with.

Consumer Appeal for Buy Now Pay Later Stores 💰

Buy now pay later stores and solutions arose from the events of the recession. It was during this time that banks began to reduce loans given to consumers.

If you haven’t already guessed, consumer appeal is heavily focused on the convenience of being able to take home purchases while paying a fraction of the cost upfront.

You might expect that buy now pay later stores are only useful for big value purchases, such as designer clothing and furniture but this offering is very appealing to consumers no matter the cost of their order, as the service is well-suited for a range of purchases for stores on Shopify.

Therefore, buy now pay later stores and finance tools have begun to satisfy customer hunger for two competing demands and these demands are as follows;

The consumer’s desire for instant gratification.

The inability to pay for a product/ service upfront.

For those of you who are thinking that buy now pay later stores seem to offer a service that is too good to be true, don’t forget that, as with any financed purchase option, missed or late payments will have negative consequences for consumers.

Therefore, it is important to consider this before any Shopify store decides to convert to a buy now pay later shop.

Depending on the provider at hand, missed or late payments to buy now pay later stores could result in extra fees, interest charges and even cancelled promotional interest rates.

Subsequently, missed or late payments can even bring down a customer’s credit score, but of course, this will depend on the chosen provider and plan selected through buy now pay later stores.

With many consumers taking the cautious approach to spending, buy now pay later stores will become increasingly attractive as a service both in-store and online as we evolve through the pandemic, but online retail is where the key focus is for many merchants right now since taking a hit in sales earlier last year from store closures across the country.

Since then, many customers have slipped into the habit of shopping online and we all know how hard habits are to break.

Smart businesses know this, so rather than trying to change the approach of the customer, it’s more sensible to go with the flow, which is why it’s important to remember that much of today’s customer spending is online.

Why Do Merchants Offer Buy Now Pay Later Stores and Services?

Buy now pay later stores in the industry are growing rapidly which can be seen across data acquired by different loan firms. Affirm for instance had a loan volume that topped $2 billion in 2018, whilst underlying sales at Afterpay equated to more than $8.5 billion.

Loan growth is the key metric by which investors measure their firms, but the real test here is whether retailers like Shopify stores will benefit from offering instalment solutions.

For Klarna however, the answer is already yes, as the company believes that an added financing method at the checkout which allows customers to spread order costs over time through buy now pay later stores and pay at their own pace is just what the retail industry has been crying out for.

Additionally, financing options through buy now pay later stores do well to increase consumer purchasing power, which inevitably results in further sales for the merchants who offer buy now pay later services. Typically, brands who offer Klarna’s instalment financing service have experienced:

A 58% increase in average order value (AOV).

A 30% lift in checkout conversion rates.

Similarly, Afterpay has declared that retailers who use this payment option have experienced; improved purchasing frequency, loss rates, and customer lifetime value.

Additionally, the buy now pay later stores who offer Affirm can expect:

A 20% increase in conversion rates.

An 87% increase in AOV.

The information above is just a handful of success story examples that buy now pay later stores have experienced, but the momentum of a similar nature can be expected using other financing tools such as Shop Pay.

Despite the buzz around the shop now buy later services, there is a little scepticism around the whole idea.

Why? Well, some critics argue that even the most creatively packaged and marketed instalments are little more than stealth ways to hook young consumers into taking on more debt for items that they don’t need when browsing buy now pay later stores.

That being said, with billions of dollars in loan volume and tens of thousands of brands offering instalment financing, the option is unequivocally gaining traction.

Not only is this enabling buy now pay later stores to increase their sales, but instalment financing purchases are allowing already indebted consumers to get a better night’s sleep because merchants are taking the weight of the purchase.

So, now that we’ve given buy now pay later options an overview, let’s look at each of the selected services individually and what it could mean for your Shopify store:

Klarna 🛍️

If you didn’t know already, Klarna offers customers 4 interest-free payments with no credit impact, whilst paying businesses upfront for the total cost of the order at hand. Customers have two options for financing pay. These are; in 30 Days and 6-36 months of financing. The latter being most suitable for buy now pay later stores selling large ticket items. In all honesty, we think Klarna is one of the top dogs in the space, due to its trustworthy reputation.

Key Features

On-site messaging can be found on product pages. This handy feature will allow users to learn about payment options before checking out on Shopify. This tool has resulted in fewer abandoned carts and checkouts for Klarna merchants.

An express button for checkout (or within the Klarna app) for speedy payment.

A contactless payment solution that lets customers use flexible payment options in-store.

Pre-filled details preferred shopping and pre-selected payment options for returning customers.

Access to an engaged network on the Klarna shopping app to help build store awareness.


Affirm offers its partner’s customers flexible payment options with no hidden fees. However, the tool does add 0-30% interest on top of an order cost for big-ticket purchases across buy now pay later stores.

Key Features

Customers can extend financing terms up to 36 months.

Omnichannel integration is available online, in-store and through telesales.

Access to an engaged network is given to help build store awareness.

Shop Pay 💸

Shop Pay is an accelerated checkout that is powered by Shopify. Shop Pay works by allowing customers to save their; email address, credit card, shipping and billing information so that they can complete their transaction faster the next time they are directed to the Shopify checkout.

Key Features

Shop Pay is geared towards protecting the customer and their money so, every personal detail shared with Shop Pay is encrypted from end to end.

Customers who choose to check out with Shop Pay on buy now pay later stores can select whether they would like to pay in full or 4 equal instalments (via participating stores).

Customers can make debit or credit card payments every two weeks or turn on automatic payments. Alongside this, there are no hidden fees, no interest rates, no late fees and no impact on a customer’s credit score.

Billing and shipping information will only need to be shared once, as customers use an email address to tap through the purchase process.


AfterPay is another tool for buy now pay later stores that offers its customers the flexibility of paying for their order in 4 payments. This equates to 1 payment every 2 weeks. There is no interest or additional fees, as long as the customer pays back the money that they owe on time.

The tool is a popular solution for many big-box retailers such as; Free People, Urban Outfitters, and Anthropologie. Additionally stores on Shopify can make use of this payment solution too.

Key Features

Customers can pay in 4 instalments, which equates to 1 payment every 2 weeks with no interest or additional fees (as long as the customer pays on time).

Access will also be given to an engaged network to help build store awareness.

Reducing Abandoned Cart Rates 🛒

One of the most important roles that buy now pay later stores play for retailers such as stores on Shopify is in the reduction of customers who have abandoned their shopping cart. In 2018, research suggested that shoppers left more than $34 billion sitting in their shopping cart across the year.

So, what does this mean? Well, there’s a clear gap here that a vast amount of retailers need to fill and this particular gap can be filled by providing consumers with additional financing options. With time, the hope here is that conversion rates will improve significantly.

The Future of Buy Now Pay Later Stores

Buy now pay later isn’t a new revelation, but it is a new marketing strategy in the online space and data has shown that buy now pay later stores that offer instalment financing experience an increase in sales. However, interest and additional fees can still apply depending on the tool used, even if this is disclosed more transparently than other forms of credit. Competition in this field is intensifying so, things are heating up between merchants pretty quickly.

Point-of-sale (POS) instalment offerings will expedite the decision-making process that determines whether a customer will qualify for credit in brick-and-mortar stores just as they do online.

If instalment options become easy to locate, they’re less likely to give retailers like Shopify stores an edge within the eCommerce industry. It may also cause millennials, who are wary of taking on credit card debt, to overuse credit and become more indebted so, there’s something to think about.

Brands offering payable instalment options through buy now pay later stores must remain sober in their approach.

Despite genuine intentions to aid customer pressure to pay upfront for products or services, consumers who fall behind on payments could wind up with blows to their credit score and let’s face it, millennial or not, no one wants to be in that boat.

Ultimately, this likelihood may reduce a customer’s lifetime value and result in little more than pulling sales forward temporarily. With this possibility comes a risk of integrity for the brands that become involved with customers who miss the agreed payments.

However, there will of course be risk involved with everything that a retailer decides to do. So, putting this aside, we think the pros well outweigh the cons when it comes to buy now pay later stores.

Merchants on Shopify that offer this online service simplify the customer journey and make the prospect of checking out much more affordable. This offering has undoubtedly been the key force behind lifting retail sales in recent months.

Here at Karmoon, we think that buy now pay later stores and solutions are the kind of tech that the world of eCommerce has been crying out for but don’t be fooled by the increasingly crowded field of competitors, as there’s still plenty of room for merchants to improve the way that they serve their customers.

Nonetheless, it would seem as though many eCommerce businesses agree, which is why they have chosen to merge into buy now pay later stores.

For the online businesses that have not made the change already, it is estimated that more than one-third of U.S. eCommerce brands plan to offer purchase options across their thresholds in the next 12-24 months.

If you’re actively looking to work with a Shopify agency designer or developer to assist you with your business, we’d love to hear from you. Drop us an email to get started!

Get Started with Shopify

Looking to get started with Shopify? Take advantage of Shopify's 14-day free trial, no credit card is required.

If you're actively looking to work with a Shopify agency designer or developer to assist you with your business, we'd love to hear from you. Get in touch to get started!

Want to read some more?

Have a look over more posts related to this one

Klarna Merchants Have Acquired HERO
27 Jul 20217 Minute Read

Klarna Merchants Have Acquired HERO

The Best Subscription Websites
22 Sept 202160 Minute Read

The Best Subscription Websites