Buy now pay later guide: How it works and Top UK providers

Buy Now Pay Later (BNPL) lets you buy items now and pay in instalments. It’s not a niche option anymore; it’s mainstream. As of 2025, two in five UK adults (42%) have used a BNPL service, which is about 22.6 million people.

The market itself is growing just as fast, forecast to be worth over £29 billion in the UK. But this convenience has a downside. Citizens Advice reported a 67% increase in people seeking help for BNPL debt in the last year.

So how does it really work, what are the risks, and who are the best providers? This simple guide explains it all.

How Does BNPL Work?

For shoppers, the process is simple and designed to be quick.

1. At Checkout: You choose a BNPL provider as your payment method.
2. Quick Sign-up: You’re asked for a few basic details (name, address, date of birth, and a debit/credit card).
3. Instant Decision: The provider runs a fast check and approves or denies the transaction in seconds.
4. First Payment: You usually make the first instalment payment right away.
5. Payment Schedule: The provider gives you a clear schedule for the remaining payments, which are typically taken automatically from your card.

How Does BNPL Work for Merchants?

• Integration: You add the BNPL provider’s payment option to your online or in-store checkout.
• Get Paid Upfront: When a customer makes a purchase, the BNPL provider pays you the full amount immediately, minus their fee.
• No Risk for You: The BNPL provider takes on all the risk of customer fraud or non-payment.
• The Cost: You pay a transaction fee (typically 2-8%) to the provider, which is higher than standard credit card fees.

Best Buy Now Pay Later Apps & Providers in the UK (2025)

Here are some of the most common buy now pay later apps and services you will find in the UK.

1. Klarna

This app is a central part of the experience, allowing you to shop, manage payments, and report returns. A key feature is its Buyer Protection Policy, which lets you pause your payments if your order doesn’t arrive, is defective, or is not as described. The most widely recognised provider. It offers two main BNPL options:

• Pay in 3: Splits your purchase into three equal, interest-free payments. The first is taken at checkout; the next two every 30 days.
• Pay in 30 Days: You get the item now and pay the full amount 30 days later, with no interest.

2. Clearpay

Used by over two million shoppers in the UK, you can find Clearpay at retailers like Marks & Spencer, NEXT, Pandora, and Superdrug. Its app provides a digital card that lets you use the service in physical stores. Very popular, especially with fashion and beauty retailers.

• Pay in 4: Splits the cost into four interest-free instalments, paid every two weeks.

3. PayPal

A major benefit is that “Pay in 3” charges no late fees. Your purchase is also covered by PayPal’s Buyer Protection, which is a well-known and robust policy. Because it’s part of the PayPal system, you don’t need a separate app or account beyond your main PayPal one.

• Pay in 3: Splits purchases (between £30 and £2,000) into three interest-free monthly payments.

4. Splitit

Splitit does not charge interest or late fees, but remember that your credit card’s own rules (about interest and minimum payments) still apply. Because it uses your card’s existing credit line, there is no new application, no credit check, and no impact on your credit score. 

This one is different. It uses your existing credit card (Visa or Mastercard). It places a hold (an authorisation) on your card for the full purchase amount but only charges you the first installment. The hold is then reduced as you pay each monthly instalment.

5. Zilch

Zilch is a major FCA-authorised UK provider with over 5 million users. Its key advantage is flexibility; you can use it at places like Amazon or eBay or even to pay a bill. 

Zilch operates differently. It gives you a virtual Mastercard that you can use almost anywhere (even at stores not partnered with BNPL). You can choose to “Pay in 4” (25% upfront, then three more 25% instalments over six weeks, interest-free) or “Pay in 1” (pay the full amount upfront and get 2% back in “Zilch Rewards”).

Should Your Business Offer BNPL?

Adding a “Buy Now, Pay Later” (BNPL) option is a critical weapon at your disposal for boosting sales. Here’s a quick look at the pros and cons.

The Benefits (Pros):

• Increased Sales & Order Value: Customers order more and add more to the cart when there is an option to pay in instalments.
• Improved Conversion: Offering customers an affordable payment plan can cut down on “cart abandonment” when it comes to large ticket purchases.
• You Get Paid Upfront: The BNPL company pays you the full amount immediately (minus their fee). They take on the risk of collecting payments from the customer.

The Costs (Cons):

• Transaction Fees: BNPL providers charge higher fees than credit cards, typically ranging from 2% to 8% per transaction.
• Integration: You may have technical or setup costs to add the BNPL service to your website’s checkout.

How does Finexer assist your BNPL service?

Finexer is an open banking API provider that allows businesses to access client data and initiate payments using APIs with their consent.

• Key Features: It’s made to be easy for developers and simple to add to your existing systems. It also connects to 99% of UK banks.

• White-Label Solution: This feature lets you use Finexer’s tools, but it looks like your own brand to your customers.

• How it Helps with BNPL: Instead of paying fees to a separate BNPL provider, Finexer lets you build your own BNPL service. You can use its tools to:
  • Check a customer’s identity.
  • See if they can afford the payments.
  • Collect payments directly from their bank on time.

Wrapping Up

Finexer can also be used by BNPL providers to power smoother, lower-cost repayment flows through Open Banking. A strong BNPL setup depends on reliable instalment collection and an accurate view of a customer’s ability to repay.

By integrating with Finexer, providers can verify accounts instantly, reduce dependence on card rails, and lower processing cost, while keeping repayments fast and secure.