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BNPL

Buy Now Pay Later — split payment in instalments

A payment solution that lets a consumer buy now and pay later, typically in 3 to 12 interest-free instalments or on a deferred basis. A market dominated by Klarna, Alma, Younited Pay, FLOA and PayPal Pay in 4. Subject to tighter oversight under the Consumer Credit Directive 2 (CCD2).

See also:Scoring crédit alternatifCash flow underwritingEmbedded financePayPalECEP

Definition

BNPL (Buy Now Pay Later, or split payment) lets you buy right away and pay later.

Three main forms:

  • pay in 3 or 4 interest-free instalments (first instalment immediate, the rest monthly or weekly);
  • deferred (full settlement 30 days later);
  • longer instalment plans (6 to 36 months, with or without interest).

Having become a major category in both e-commerce and in-store payments between 2018 and 2024 (Klarna, Alma, Younited Pay, FLOA, PayPal Pay in 4, Affirm), the market is now undergoing deep change: slower growth, tighter regulation (CCD2 in 2026) and consolidation.

How it works

The BNPL provider advances the full amount to the merchant instantly, then recovers it from the customer in several instalments.

Business models

  • For the merchant: a fee of 2 to 5% on the interest-free pay-in-3/4; on longer plans (6 to 36 months) a variable fee, with the cost borne by the customer (APR).
  • For the provider: the merchant fee is the main short-term revenue, supplemented by interest on longer plans, late-payment penalties (capped) and a merchant lift effect (higher average basket).
  • For the consumer: free in principle on the pay-in-3/4 (apart from late penalties); a classic credit with APR on longer plans.

Major players

  • French specialists: Alma (leader in interest-free pay-in-3/4), Younited Pay, FLOA (acquired by BNP Paribas in 2022, ~€258M), Cofidis 4xCB, PayPal Pay in 4.
  • International: Klarna (SE, over 100M users, NYSE IPO in September 2025 at around $15B), Afterpay/Clearpay (acquired by Block in 2021), Affirm (US, Amazon partner), Apple Pay Later (launched then discontinued in 2024 in favour of Affirm).
  • Longer-term / credit: Cetelem (BNP), Cofinoga, Sofinco (Crédit Agricole), Younited, Lydia Crédit.

Regulation: CCD2

The Consumer Credit Directive 2 (EU 2023/2225) takes effect in November 2026 and profoundly changes BNPL:

  • it explicitly brings BNPL within the scope of consumer credit (the end of the grey area);
  • standardised pre-contractual information (SECCI), even for interest-free pay-in-3;
  • mandatory creditworthiness assessment (cash flow underwriting + credit bureau);
  • caps on penalties and late fees;
  • a 14-day right of withdrawal;
  • reporting of incidents to the FICP.

The upshot: "light" BNPL with no file is now more tightly regulated, at the cost of higher operating expenses.

Risks

  • Consumer: over-indebtedness from stacking small BNPL plans (invisible debt), late penalties, FICP listing in case of repeated incidents.
  • Provider: credit risk (default rate of 1 to 3% on average, up to 5–8% in some segments), CCD2 compliance costs, higher cost of capital since 2022.
  • Merchant: a higher fee than card, but a conversion lift of +20 to 40% and an average basket up +30 to 50% — often very profitable above €100.

Use cases

  • E-commerce: fashion and beauty (Sézane, Nocibé), tech (Boulanger, Fnac), travel (Voyage Privé), home décor (Maisons du Monde).
  • In-store: Apple Store (pay-in-4 via Cetelem), Decathlon, Boulanger (pay in 3 to 10).
  • Emerging B2B: Defacto, Hokodo and Tilt advance invoices and spread out payments for micro-businesses and SMEs.

What BNPL is not

  • Not revolving credit: it is tied to a specific transaction, not to a permanent line of money.
  • Not free: on the "interest-free" plans, the cost is paid by the merchant, who passes it on.
  • Not a card: it is a payment arrangement, not a fully fledged means of payment.
  • Not a bank: most are EMIs or PIs, some backed by a bank (FLOA, Cetelem) or credit institutions themselves (Younited, Cofidis).
  • Not universal: a poor score sends the customer back to card or cash.

In the PSD2 / Open Finance ecosystem

BNPL relies heavily on Open Banking:

  • Cash flow underwriting: instant scoring via PSD2 aggregation (Algoan, in-house engines).
  • Categorisation: to assess the applicant's income and expenses.
  • PIS: payment initiation (SCT Inst) as an alternative to card collection.
  • VoP: to make the beneficiary's identity more reliable.

It is one of the win-win use cases between Open Banking and credit fintech.

Real-world examples

  • Alma: French leader in pay-in-3/4, strong growth in 2018–2022 then a refocus on profitability.
  • Klarna: peak valuation of $45.6B in 2021, falling to $6.7B in 2022, then an NYSE IPO in September 2025 at around $15B.
  • FLOA: acquired by BNP Paribas for €258M in 2022 (formerly Banque Casino).
  • Younited Pay: pivoted to BNPL after a history of instant credit, with partnerships with Microsoft Surface and Apple resellers.
  • Apple Pay Later: launched in the US in 2023, discontinued in 2024 in favour of an Affirm partnership.
  • CCD2 impact: Klarna and Alma expect +10 to 15% operating costs to come into compliance.
  • French regulatory pressure: the ACPR had already published recommendations on creditworthiness assessment back in 2023, even before CCD2.

Sources

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