Choosing the right Buy Now, Pay Later Partner for your Business

As a store owner, you’ve probably heard about ‘Buy Now, Pay Later’ (BNPL) services. There are several major players in the space and new startups cropping up every day.

Founded in 2012, Affirm is one of the largest BNPL companies operating in the United States. Choosing to add Affirm could help your business increase sales, but it may also come with significant merchant transaction fees.

Keep reading for a detailed breakdown of things to consider before you add Affirm as a payment option for your customers + tips on how to reduce your merchant transaction fees.

Benefits of ‘Buy Now, Pay Later’ with Affirm

Affirm claims that merchants using its services can meaningfully increase topline revenue.

They claim an 85% increase in average order value and a 20% improvement in repeat purchases by customers who use Affirm at checkout.

Affirm also claims that it has 6.2M users in the United States and is very popular with customers looking to spread payments on higher-priced goods like a Peloton bike or furniture.

This data has not been independently verified, so individual store results will vary.

Costs of BNPL with Affirm

Several companies doing $1-10M in annual revenue have reported that they pay between 4.29% and 8.0% per transaction to Affirm, with a median of 6.0%. We will update these figures as we get more reports.

First, you should know that BNPL fees are much higher than credit card processing fees

Capital One’s CEO, Richard Fairbank, took a shot at existing buy now/pay later providers, noting that they take substantial margins on each purchase and that the “elephant in the room is the sustainability of the merchant subsidy.” Source: American Banker

Second, these fees are negotiable and you may be paying too much if you are not aware

Affirm’s own website states that “we negotiate these loan eligibility criteria and interest rates with each merchant individually.”

Third, Affirm and other firms are usually willing to offer lower pricing to larger merchants and those who negotiate.

According to a recent report by Hubspot, “Afterpay charges the merchant a per transaction fee plus up to 6% of the purchase value, although we have heard of rates as below 2%. Zip’s average charge to merchants is 4% of the purchase value, and we are told that there are rates as low as 1% in the market, which may be for specific merchants and purchases sizes.”

Merchants in ScalePower's database report paying anywhere from 3-6% per transaction with an average of 4.9% for business with $500K - $10M in annual sales.

How to Reduce Merchant Fees through negotiation

Alone, you have to accept whatever pricing you are offered. But, as a group, we can negotiate bulk discounts for everyone.

If you, or anyone you know, might benefit from reducing merchant fees, please sign up to our wait list today. We are engaging with the business development teams at various BNPL companies next month and will negotiate reduced merchant fees for our network. 

•  Buy Now, Pay Later (BNPL) companies typically charge 5-8% per transaction + a processing fee. 
• Larger merchants are able to negotiate much lower fees (2-4%) because they have more leverage.
• We are gathering 1,000 small and mid-sized merchants and negotiating with companies like Affirm, Afterpay, Sezzle, and Klarna by December 1st. Our target is to reduce these fees, at no charge to you.

There is no cost to join the group and no obligation to use a ‘Buy Now, Pay Later’ service. The more merchants who join, the greater our negotiating leverage. So, if you know other merchants who might be interested, please let them know about this initiative! 

What Affirm means for your customers

Affirm is popular among customers looking to spread payments on more expensive items like a Peloton purchase.

From the customer perspective, here is how Affirm compares to other ‘Buy Now, Pay Later’ Services.