Treasury Management for Buy Now Pay Later Business Model

The explosive growth of Buy Now Pay Later (BNPL) has caught many treasury teams off guard. While marketing and sales teams rush to implement these payment options, treasury departments face mounting pressure to manage new payment flows, adapt existing processes, and maintain financial control. With the BNPL market projected to grow from $334 billion in 2024 to $687 billion by 2028, according to Juniper Research, treasury teams must develop clear strategies to handle this payment evolution.

The Buy Now Pay Later (BNPL) business model revolutionises the way consumers make purchases by allowing them to split transactions into smaller, interest-free instalments. BNPL providers act as financial intermediaries, bridging the gap between customers, merchants, and financial institutions. This innovative business model offers customers flexible payment options, making it easier for them to manage their finances while shopping.

For merchants, the BNPL model is a game-changer. It not only increases conversion rates but also boosts the average order value and enhances customer retention. By offering BNPL options, merchants can attract a broader customer base, including those who might otherwise abandon their carts due to budget constraints. The ability to pay in instalments without incurring interest charges makes BNPL an attractive alternative to traditional credit cards, driving more sales and fostering customer loyalty.

BNPL's appeal extends beyond consumer convenience - it fundamentally changes business economics. Research by McKinsey shows BNPL drives 20-30% higher conversion rates and increases average order values by 30-50%. These benefits come with a price: merchant fees ranging from 2% to 8%, typically higher than traditional credit card processing. Large merchants can negotiate rates around 3-4%, while smaller businesses often pay 6% or more.

The immediate settlement of BNPL transactions creates a double-edged sword for treasury teams. While instant access to funds reduces working capital needs, the higher processing fees demand careful cost-benefit analysis. Nielsen data reveals that 45% of BNPL users would have abandoned their purchase without this payment option, suggesting the increased fees may be offset by recovered sales.

BNPL integration introduces new layers of complexity to treasury operations, as each BNPL service provider uses different settlement schedules, fee structures, and reporting formats. Treasury teams must track settlements across multiple providers while maintaining accurate financial records.

The shift in credit risk from merchants to BNPL providers eliminates chargeback exposure but introduces new considerations. Treasury teams must monitor provider financial stability and implement appropriate concentration limits. Setting appropriate credit limits is crucial for managing financial risk and ensuring lenders can operate effectively while accommodating clients' needs. Cross-border transactions add currency exposures, with 35% of merchants identifying FX risk management as a key BNPL implementation challenge.

Operational efficiency requires robust integration between payment systems, treasury platforms, and accounting software. Leading companies use dedicated settlement accounts for each BNPL provider, supported by automated reconciliation processes that can reduce processing time by 75% and cut error rates by 90%.

Smart BNPL integration starts with clear provider selection criteria. Beyond basic fee comparisons, treasury teams should evaluate:

Settlement reliability and speed

Geographic coverage and currency capabilities

Integration options and technical support

Financial stability and market presence

Data access and reporting capabilities

The evolving regulatory environment adds another layer of complexity. Recent regulatory focus on consumer protection and credit reporting may impact settlement processes and reporting requirements. Treasury teams need flexible systems that can adapt to changing compliance demands.

Cross-border expansion presents both opportunities and challenges. BNPL penetration varies significantly by market - from 2% of e-commerce transactions in the US to 23% in Sweden and 19% in Germany. International growth requires treasury teams to manage multiple currency flows while maintaining consistent processes across regions.

Regulatory and Compliance Considerations

The BNPL industry is subject to various regulatory and compliance requirements to ensure consumer protection and financial integrity. BNPL providers must comply with consumer protection laws, such as the Consumer Credit Act, to ensure their services are transparent and fair. This includes providing clear information about payment terms, fees, and potential penalties for late payments.

Additionally, BNPL providers must adhere to anti-money laundering (AML) and know-your-customer (KYC) regulations to prevent financial crime. These regulations require providers to verify the identity of their customers and monitor transactions for suspicious activity.

Merchants offering BNPL options must also ensure compliance with relevant regulations, such as the Payment Card Industry Data Security Standard (PCI DSS), to protect customer data. By adhering to these regulatory and compliance requirements, both BNPL providers and merchants can build trust with their customers and maintain the integrity of their financial operations.

Implementing BNPL Integration

Implementing BNPL integration requires a strategic approach to maximise its benefits while mitigating potential risks. Merchants must carefully evaluate the advantages of offering BNPL options, such as increased sales and customer satisfaction, against the associated costs and complexities.

To integrate BNPL into their business, merchants can partner with leading BNPL providers. These providers offer a range of integration options, including APIs, SDKs, and plugins, making it easy for merchants to add BNPL to their checkout process. By choosing the right BNPL provider and integration method, merchants can seamlessly incorporate this payment option into their existing systems, enhancing the overall shopping experience for their customers.

Success in the BNPL era requires treasury teams to balance automation with control, considering various business models. Key focus areas include:

Automated reconciliation systems that can handle complex settlement flows while maintaining accuracy. Manual processing becomes unsustainable as BNPL volumes grow.

Clear risk management frameworks covering provider concentration, currency exposure, and operational controls. Regular monitoring and review processes help identify emerging risks.

Integrated visibility across payment flows, enabling treasury teams to optimise working capital and manage liquidity effectively.

Market consolidation will likely reduce the number of BNPL providers but may increase individual provider volumes. Treasury teams should maintain flexibility in their systems and processes to adapt to market changes.

BNPL represents a fundamental shift in payment patterns, especially in the context of increasing online shopping, that treasury teams cannot ignore. Success requires moving beyond basic integration to build scalable, efficient processes that can handle growing payment complexity. As a popular payment method, BNPL allows customers to pay in instalments, making it increasingly appealing. Companies increasingly turn to unified treasury platforms like Fyorin to manage multiple payment providers, automate reconciliation, and maintain real-time visibility across global operations. This integrated approach helps reduce complexity while maintaining the control and efficiency essential for modern treasury operations.

How do BNPL companies provide interest-free instalments?

BNPL companies partner with merchants to offer customers the ability to pay for purchases through interest-free instalments. Merchants cover the cost of these instalments through fees paid to the BNPL providers, benefiting from increased sales and improved customer retention.

What role does a soft credit check play in the approval of BNPL loans?

A soft credit check is used during the approval process for BNPL loans to quickly evaluate a customer's creditworthiness without affecting their credit score. This ensures accessibility while maintaining a level of risk assessment.

How do interest-free instalments impact treasury operations for BNPL companies?

Interest-free instalments create a need for BNPL companies to manage complex cash flows and reconcile high transaction volumes efficiently. Treasury teams must optimise working capital and ensure liquidity while handling these deferred payments.