The BNPL FAQ Guide: "How do BNPL Companies Make Money?" + Other Top Questions


Heather Hudson

May 25, 2021

The concept of buy now, pay later (BNPL) is having a moment. Consumers of all ages and walks of life are increasingly taking advantage of the flexibility to pay less up front for a purchase and divide it into biweekly or monthly installments.

Although BNPL companies like PayBright have been around for years, the pandemic can be partially credited for accelerating the uptake of these services. As more people shopped from the comfort and safety of their homes, e-commerce began to boom – along with the demand for BNPL.

And 2021 may be the biggest year yet. A recent PayBright survey of more than 2,500 Canadians found that the vast majority of respondents want and expect BNPL when they shop in-store or online.

Which got us thinking … you might be wondering how BNPL works. Or how BNPL companies make money. And whether a credit check is required to participate. And more! Here are the answers to some of your most burning BNPL questions.

How does BNPL work?

Buy now, pay later operates exactly as it sounds: When a consumer visits a retailer that has partnered with a BNPL service (in-store or online), they will have the option at checkout to divide the cost of their purchase into installment payments, i.e. buy now, pay later.

PayBright offers two types of payment plans: ‘Pay in 4’ allows you to make four interest-free biweekly payments for smaller purchases. ‘Pay Monthly’ is an option to make monthly payments (over six to 60 months) for larger purchases.

Who can use BNPL plans?

To use PayBright, you must be the age of majority of the province or territory you live in, and you need to have a valid history of credit in Canada.

You can see if you prequalify to use PayBright here.

Is there a minimum purchase amount to use BNPL?

At PayBright, each retailer sets their own minimum purchase amount. For Pay Monthly, it’s typically around $300. For Pay in 4, it can be as low as $50.

How do BNPL services make money?

Revenue typically comes from partnering with retailers who pay a small percentage of each sale made through their e-commerce or in-store businesses. PayBright does not charge any type of application fee, annual fee, or late fees to consumers. As for interest-bearing payment plans, those are listed up-front and are strongly opposed to products involving retroactive interest.

Does using a BNPL plan affect a consumer's credit score?

It depends. If you pay your low- to no-interest payments on time or in advance, opting for an installment payment plan will have no negative impact on a credit score. However, if you default on your payments, it may hurt your credit score, as is the case with any kind of credit or loan system.

Are there interest charges or other fees associated with BNPL?

There may be interest and/or processing fees, depending on the retail partner you’re buying from. At PayBright, the cost of our payment plans starts at 0% APR (annual percentage rate).

We aim to have the highest standards of transparency so that charges are always fully clear to you. The exact APR/total cost of borrowing that applies to your purchase will be calculated and shown to you before you finalize any transaction.

Is BNPL a huge risk to merchants?

Not at all! In fact, an installment payment provider like PayBright easily integrates into existing POS systems, in either e-commerce or physical stores. And they take care of all the approvals and risks of lending that are involved so retailers don’t have to.

Our 8,500+ retailer partners, including Sephora, Samsung, Wayfair and Endy, chose our BNPL service because they want to offer more flexibility to their customers. For many people, it’s a better option than buying on credit.

What are the top BNPL companies in the world?

  • Affirm (PayBright’s parent company)
  • PayBright
  • Sezzle
  • Klarna
  • Afterpay

What business impact does BNPL have for merchants?

Some merchants have noted immediate business results including 25%+ increase in sales conversions, 30%+ AOV growth, and 20% more repeat business. BNPL plans have proven to drive business results from day one.

The rise of BNPL means more Canadian consumers appreciate the convenience of paying for their purchases in more manageable installments. PayBright is proud to be the service of choice for thousands of retailers across the country.

If you have a question we haven't answered here, please click on over to our Help Center for more information.

This article is provided for informational purposes only. It is not an exhaustive review of this topic. The content is not financial or investment advice. No professional relationship of any kind is formed between you and PayBright. While we have obtained or compiled this information from sources we believe to be reliable, we cannot and do not guarantee its accuracy. We recommend that you consult your personal finance professional before taking any action related to this information. PayBright is a provider of Buy Now, Pay Later (BNPL) solutions. BNPL providers offer plans with a variety of terms and conditions, including interest rates, fees, and penalties, and have different standards for qualifying for loans. Laws and regulations governing BNPL providers vary by jurisdiction. We recommend that you compare and contrast plans, read the fine print, and conduct detailed research into any BNPL provider before using their services.

Share this article

Heather Hudson

Featured Writer

Follow on

Never miss a story

Brighten your inbox with Talking Shop news!

Join our email list

Get promotional offers from our merchants delivered right to your inbox.