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, Zip (previously QuadPay) is one of the largest BNPL companies operating in the United States. Choosing to add Zip 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 Zip as a payment option for your customers + tips on how to reduce your merchant transaction fees.

Benefits of ‘Buy Now, Pay Later’ with Zip

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

They claim a 60% increase in average order value and an 80% improvement in repeat purchases by customers who use Zip at checkout.

Zip also claims that it has 7.3M users and is very popular with customers looking to spread payments from stores like Walmart, Target, and Amazon.

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

Costs of BNPL with Zip

Zip claims to have no setup fees or contracts. Their pricing, including merchant and transaction fees derives from an “application based on your unique business situation.” 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

Third, Zip 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 Zip, 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 Zip means for your customers

Zip is popular among customers looking to spread payments from stores like Walmart, Target, and Amazon.

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