Buy Now – Pay Later: The Hidden Champion of Commerce Advertising

“Buy now – pay later” (BNPL) is becoming an increasingly popular in e-commerce. What advantage does this payment method offer retailers? What do they need to consider when setting it up? And who are the most important providers on the market today?
Felix Witte • mrge
6. Februar 2023
4 min read

Key Take Aways

Executive summary: 5 key take-aways for quick readers

  1. Worldwide, 360 million people are already using “buy now – pay later”, also known as “point-of-sale installment loans”.
  2. Retailers offering BNPL achieve 68 percent higher average order values (AOV)
  3. PayPal and Klarna are two of the main providers of BNPL.
  4. BNPL providers are not only payment service providers – through the content in their apps, they also become publishers.
  5. By working with Commerce Advertising platforms like mrge, those providers benefit from higher commissions and customized deals.

Why “buy now – pay later” is the new standard for online retailers

Buying the desired product immediately, but paying later on, is a convenient option for many online shoppers. Largely due to the e-commerce boom driven by Covid-19, “buy now – pay later” (BNPL) reached a market value of $141.8 billion in the midst of the 2021 pandemic and is likely to experience 33 percent annual growth over the next few years.

In this respect, BNPL differs significantly from traditional credit purchasing: The “point-of-sale installment loan” is not granted by a bank or by the retailer, but by payment service providers such as Klarna or PayPal. And the loan is usually repaid without interest, making BNPL particularly attractive for end customers.

BNPL also offers numerous advantages for retailers:

Improved shopping experience: For many customers, it is important that they find their preferred payment method in the checkout process. The increasing popularity of BNPL makes it almost mandatory for e-retailers to offer this option.

Higher conversion rates: The option of paying for a purchase at a later date often triggers customers’ desire to buy. If you offer BNPL, you can benefit from 20-30 percent higher conversion rates. In addition, retailers with this option achieve a 68 percent higher average order value (AOV).

Payment security: When retailers offer BNPL, they hand over processing to the payment service provider. So retailers receive their money in any case – in the event of a payment default, the payment service takes care of balancing the loan. The retailer only pays a transaction fee to the payment service provider.

Download the infographic:

BNPL market overview

As the popularity of BNPL grows, so does the number of providers in this area. Today, the most important players are:

BNPL providers as publishers

In the context of Commerce Advertising, BNPL service providers do more than just lend money to end customers. Through the rich content they offer in their apps and on their websites, they also act as publishers, giving online retailers (advertisers) access to a large number of new customers. However, advertisers benefit from more reach. Payment service providers enjoy a high level of trust, which rubs off on their advertiser partners.

BNPL providers who become active as publishers benefit from working with online retailers in several ways: In addition to the transaction fee they charge when a customer selects “buy now – pay later”, they also receive a commission from the retailer for each successfully referred customer.

By working with a Commerce Advertising platform like mrge, BNPL providers as publishers not only gain access to a large number of advertisers, but also save a lot of administrative effort: all partnerships are managed centrally. In addition, bundling so many advertisers makes higher commissions possible.

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