What is BNPL and how does it work?
19 February, 2022
Penenza founder
Dmitrii Pangin
BNPL is not classic POS lending - that is, a loan from a bank for a product at a point of sale or online store. This service allows you to pay for purchases in equal installments over a short period of time. Customers do not have to enter into a loan agreement with a bank and do not have to pay additional fees. It is important to emphasize the division of BNPL into two main sections: B2C and B2B. For B2C, it is based on a new approach to customer evaluation, where a decision is made in seconds based on information about the name and phone number. On the other hand, for B2B this period is longer, and the decision is made based on the scoring.

The "buy now, pay later" model involves three participants: the customer, service provider and the agent (operator). According to the terms, the buyer buys the goods without appreciation and pays the cost in equal installments. In this case the operator transfers the entire amount of the purchase to the service provider the next day, minus its commission.

BNPL services can help businesses to increase average order check, attract more customers and boost sales. Such services can also be useful for companies and banks, because they are profitable in terms of attracting new customers (legal entities) and increasing loyalty, as well as receiving commission income from sellers and penalties in case of violation of payment terms from customers. BNPL is suitable for those who, for whatever reason, do not want to take out a loan, but find paying in installments through the next two payments more comfortable.

Currently the biggest worldwide players on the BNPL B2C market are Afterpay, PayPal, Affirm, Klarna, Splitit, Sezzle, Perpay, Openpay, Quadpay and LatitudePay. One of the most famous players, Swedish company Klarna, has 90 million active users in 17 countries making about 2 million transactions a day.

According to Klarna statistics, the average bill increases by about 60-70%, and 44% of shoppers are willing to abandon a purchase if there is no option to pay in installments when placing an order.
What is buy now, pay later?
Buy Now Pay Later is a rapidly growing type of loan that serves as a close substitute for credit cards
Rohit Chopra СFPB Director
In the case of B2C operations, payment for goods is divided into 4 parts in two-week increments with no need to borrow from the bank and with no interest payments (if there are no delinquencies). That is, the buyer uses his money, but pays the amount in installments; the merchant (retailer) receives the entire cost of the goods at once - it's paid by the provider. In B2B the payment takes place over the course of, for example, six months, with monthly installments.

How does this work For B2C operations? The buyer:

  1. Selects an item and adds it to the cart in the online store.
  2. Chooses the BNPL provider payment method.
  3. Enters their full name and phone number and binds his bank card. The first payment is deducted.
  4. Receives the goods by any available method. If it doesn't fit, you can make a normal return of the item to the store, and then get the first payment back on the linked card.
  5. Tracks upcoming payments in the app or sets up an autoschedule.

How does this work for B2B operations? The service provider:

  1. Agrees on the process of paying in installments with the buyer.
  2. Receives the first part of the payment from the buyer and the partial amount provided by Penenza.
  3. Pays Penenza a commission based on the agreed deal with the buyer.
  4. Penenza receives the remaining amount from the buyer over a fixed installment period.
How does BNPL work?
Want to know more about Interest-free capital from Penenza for installment purchases?
There are several BNPL (Buy Now, Pay Later) B2C services available in India. Some of the main ones include:

  • LazyPay: The service is offered by LazyPay, a company owned by PayU India, which is a leading digital payment solutions provider in the country.

  • Simpl: Based in Bengaluru, India, this platform is designed to make online shopping more accessible and convenient for consumers.

  • Paylater: Consumers use the Paylater service to make purchases from a wide range of merchants, including e-commerce platforms, travel websites, and food delivery businesses.

  • ZestMoney: ZestMoney is a digital consumer lending platform that uses proprietary algorithms, machine learning, and big data analytics to assess credit risk. Users can make purchases up to a certain credit limit and then pay for them later, usually within 15 days.

  • FlexPay: To use FlexPay, consumers need to sign up for an account, which typically involves providing some personal and financial information. Once the account is set up, users can make purchases by selecting FlexPay as the payment method. This platform is focused on large appliances and other expensive purchases.

  • FlyWire: FlyWire is a BNPL service that specializes in online education payments, it allows students to pay their tuition and other education-related expenses in installments, rather than paying the full amount up front.

  • CRED: CRED is a credit card bill payment platform that also offers a BNPL service, it rewards users for making payments on time and offers exclusive deals and discounts from partnered merchants.

It's worth noting that BNPL services are growing rapidly in India and many companies have entered the market with different features, interest rate and flexibility to provide the same services.

In addition to B2C BNPL services mentioned above, there are some other providers that also have a strong presence in the Indian market:

  • Kissht: An online platform that provides instant personal loans and BNPL options for various types of purchases, including electronics, home appliances, and furniture.

  • EarlySalary: Offers short-term personal loans and BNPL options to salaried individuals.

  • MoneyTap: A mobile app-based BNPL and personal loan provider.

  • SlicePay: Targeted towards students, this BNPL service allows users to make purchases and pay for them in installments.

  • Paytm Postpaid: An offering from Paytm, one of India's largest digital wallet and payment providers, that allows users to make purchases and pay for them later.

On the other hand, large companies that operate on a B2B scale include Rupifi, Mondu, Biller, Billie, Zilingo and others.
The most popular BNPL services in India
The advantage of this lending method is also its main disadvantage. If the desired product or service is not available from the BNLP-service's partner stores, you can't use installment payments, just like in the case of high costs. Then the standard credit products of banks - loans and installments - remain without alternative.

An important aspect of BNPL that should be considered in both B2C and B2B is that if you ignore the BNLP-service requirements at all, then the system will refuse to buy in the future. The company may transfer customer data to a third party - for example, collectors. In addition, the service also has the right to collect the debt through the court.

At Penenza we help to grow sales by providing the possibility to offer an installment plan to buyers. They usually face problems with wanting to buy more from suppliers, but not having working capital in order to do so.


This format has a number of clear advantages for customers that use it when making their purchases. Here are some of them:

  • The possibility of buying goods in installments with a convenient repayment schedule. Usually at the time of ordering 25% of the cost of the item is paid. The rest of the debt is divided into 4-6 equal installments with a periodicity that occurs once in 14 days. In essence, the client company receives a comfortable payment, not burdening the organization's budget.

  • Convenience: BNPL services make it easy for consumers to make purchases without having to pay for them upfront.

  • No fees and no penalties. If the payment discipline is strictly adhered to or if the debt is repaid early, no sanctions are imposed on the customer.

  • Easy Payments. A debit or credit card is linked to the order. The first and subsequent payments are deducted automatically. The task of the holder is reduced to timely replenishment of the account.

  • No encumbrances. The guarantee of a close relative is not required to gain access to the services.

  • Budgeting: By allowing consumers to pay for purchases in installments, BNPL services can make it easier for them to budget for expenses.

There are many significant benefits not only for customers, but for businesses as well:

  • Increased conversion and sales. According to statistics, the number of orders placed increases by 20-30% on average (according to RBC Capital Markets). At the same time the average check increases: depending on the category of products from 10 to 50%. For example, in the case of "Rue21", the company that specializes in retail sales of clothing, when implementing the service "buy now, pay later" the average purchase increased by 73%, acting as a big advantage for the company.

  • Encourage customers to make impulse purchases in installments. With the opportunity to split the cost into several monthly payments, customers actively purchase more expensive items.

  • Expanding the customer base. Increasing the number of new clients who are interested in paying in installments, but not on credit terms.

  • Forecasting of future business revenues. Positive experience with purchases on interesting terms will allow you to transfer the visitor into the category of a regular customer. Keep in mind: the terms should be fair. It is considered unacceptable to increase the price when choosing a service to pay in installments.

  • Security. Customers can enjoy zero risk experience, because suppliers pay 100% of the amount upfront.

  • Overall business growth. That includes sales, average check and the number of deals.

  • Additional payment method. The BNPL approach in a B2B setting is suitable for both online and offline sales, depending on your business type.

  • Bigger deals. Companies that rely on the BNPL method are able to sell more with the same amount of customer’s money.

  • Customer loyalty growth. Ongoing installments make it harder for clients to switch to competitors.

  • Competitive advantage. BNPL acts as a new technological tool in an intense competitive battle.

  • Funnel conversion rate growth. The usage of BNPL comes in handy if your business is looking to increase the % of closed deals.


From the point of view of development prospects, the industry carries a number of important risks. One of them is the transition to state regulation. In essence, the same rules and regulations should apply to this sphere as to microfinance organizations and banks. In fact, operators and retailers gloss over some of the important issues concerning the accrual of interest on breach of contract or options for settling debts. As the number of users of the service increased, the share of overdue payments increased. This trend could lead to stricter conditions on the part of the operator, for example: minimizing risk by introducing commission.

These are some other disadvantages that can be explored in the BNPL industry:

  • Fees and interest: Some BNPL services may charge fees or interest on the amount financed, which can increase the overall cost of the purchase.

  • Credit risk: Using BNPL services can also be risky for consumers, as it can lead to overspending and an increase in debt.

  • Late payment: some services may add late payment charges for those who miss to pay on time.

  • Lack of transparency: BNPL services may not be very transparent about all of the costs associated with using their service, which can be difficult for consumers to fully understand the implications of using it.

It's important to keep in mind that while BNPL services can be a convenient way to make purchases, they should be used responsibly. It's best to read through the terms and conditions carefully, and keep an eye on the credit limit, fees, interest rate and the due date to avoid additional charges.

Grand View Research, a research and consulting firm, predicts that the global BNPL services market will grow at a compound annual growth rate of 22.4% during 2021-2028. Allied Market Research, on the other hand, expects the global BNPL services market to reach $4 trillion by 2030, with a compound annual growth rate of 45.7% from 2021 to 2030.
Pros and cons of BNPL
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