The term ‘Buy now pay later’ (A.K.A BNPL ) is referring to the customer taking home their purchase but paying for it over time. 

In the past, ‘Pay later’ shopping typically referred to an interest-free period following the purchase, during which no payments were made and no interest charged. However, after this interest-free period, payment in full was expected otherwise the interest from the original time of purchase was added.



Finance technology has revived the concept of ‘Shop now pay later’, with modern versions much clearer about the payment and interest plan over the period of the loan. 

There are two types of BNPL solutions:

  1. Merchant transaction fee loan  – One type of point of sale loan does not charge the consumer any interest, instead charging the merchant a transaction fee. This interest-free solution is offered by companies such as Klarna, Splitit or AfterPay.
  2. Shopper Interest loan – The other type of BNPL is a point of sale loan, where the consumer is offered an on-the-spot loan by a third party. The customer is able to receive the item right at that moment, but pay overtime, including interest. There is no charge for the merchant.