Visible Commerce Connection Alternative Payment Methods
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What Is Buy Now, Pay Later and How Does It Work?
What is buy now, pay later?
Buy now, pay later, or BNPL, is an alternative payment method that allows customers to purchase products and services without having to commit to the full payment amount up front. In doing so, customers have the ability to immediately finance purchases and pay them back in fixed instalments over time.
BNPL is essentially an instant credit offering at checkout. It lets consumers defer payment in full and spread their financial commitment over a more manageable timeline that fits their budget. Customers pay the remaining balance in installments over a pre-defined period of time, usually several weeks or months, depending on the BNPL plan.
Most short-term plans are interest-free when payments are made on time, while longer-term plans may charge interest that’s set at the time of purchase. BNPL can be used for a wide range of retail products and some professional services, including beauty and wellness and home repair services.
Types of buy now, pay later plans
Short-term installments (i.e. Pay-in-4)
Short-term installments is a model popularized by BNPL provider Afterpay. Under these plans, purchases are split into four equal payments that are paid back over a six-week period.
- • Usually offer 0% interest
- • Afterpay late fees capped at 25%
- • Limits based on credit scores
Longer-term financing (i.e. installment loans)
Designed primarily for higher-value purchases like furniture, electronics or professional services. These plans extend payments over much longer terms, sometimes as long as 60 months.
- • Acts like traditional loans
- • Often carries interest rates
- • Terms up to 60 months
For Consumers: It’s important to understand the terms they’re signing up for, including the cost of interest and penalties.
For Merchants: You need to understand the types of loans offered, as this affects BNPL fees, communication, and compliance under Canadian consumer protection rules.
Buy now, pay later providers
In the Canadian market, several major BNPL providers offer many different plans and features.
Afterpay
Integrated into VCC Gateway ecosystem, offering interest-free Pay-in-4 plans for online purchases.
Affirm
Provides both Pay-in-4 and longer-term financing with interest rates ranging from 0% to 32% APR.
Klarna
Offers Pay-in-4 and financing options, with APRs typically ranging from 7.99% to 29.99%.
The buy now, pay later fine prints
Consumer Impact
Unlike with credit cards, a BNPL plan usually doesn’t require users to pay interest. Consumers find they are generally easier to get approved for, allowing for large purchases with interest-free payments.
Taking advantage of a BNPL plan won’t affect a credit score unless a payment is missed. Missing payments may result in late fees and reports to credit bureaus.
Business Risk
For businesses, risk is minimal as chargebacks are often the responsibility of the provider. While BNPL loans can be at risk for fraud, usually the provider is on the hook.
Good customer service practice dictates taking measures to prevent and detect fraud, and engaging with customers who fall victim.