In recent years, buy now, pay later (BNPL) has become a prevalent alternative payment method, allowing customers to purchase products immediately and pay for them later. BNPL platforms provide customers with more flexibility and offer businesses various benefits as well. For instance, buy now, pay later can prevent cart abandonment and increase businesses’ average order values.

In Japan, this payment method is becoming increasingly popular, particularly with people who do not have credit cards. There is also a growing trend among ecommerce sites to offer buy now, pay later.

In this article, we’ll provide practical knowledge that business owners need to know about BNPL. We’ll go over the basics of what it is, how to implement it, common buy now, pay later providers, legal considerations, and more.

What’s in this article?

• What is buy now, pay later (BNPL)?
  
• How is buy now, pay later different from traditional deferred payments?
  
• How is buy now, pay later different from credit cards?
  
• How big is the buy now, pay later market?
  
• Advantages of buy now, pay later for businesses
  
• Disadvantages of buy now, pay later for businesses
  
• Advantages of buy now, pay later for customers
  
• Disadvantages of buy now, pay later for customers
  
• Buy now, pay later providers in Japan
  
• Global buy now, pay later providers
  
• Are there legal restrictions on buy now, pay later?
  
• What to know about introducing buy now, pay later
  
• How can businesses introduce buy now, pay later?
  
• Can buy now, pay later increase sales?
  

What is buy now, pay later (BNPL)?

Buy now, pay later (BNPL) is a deferred payment method that allows customers to purchase goods immediately and pay for them at a later date. One of its key features is that it enables customers to make installment payments without a credit card. In many cases, the customer does not have to pay any interest. As a result, many customers find it to be very beneficial compared to other payment methods.

How does buy now, pay later work?

Here’s the basic flow of a buy now, pay later transaction:

• The customer selects the buy now, pay later option at checkout.
  
• The buy now, pay later provider provides the customer with a selection of payment plans.
  
• The customer selects their preferred plan and purchases the product.
  
• The buy now, pay later provider pays the business on behalf of the customer.
  
• The business pays a handling fee to the buy now, pay later provider.
  
• The business ships the product to the customer.
  
• The customer makes payments to the buy now, pay later provider at a later date.
  

With BNPL, businesses can sell products with peace of mind, without having to worry about non-payment.

How is buy now, pay later different from traditional deferred payments?

Traditional deferred payment methods, such as NP Atobarai from Net Protections, Inc., have been widely available in Japan even before the spread of the internet. With these methods, the customer receives their purchased product first and pays for it later. Traditional deferred payments are still used by many businesses, mainly in the ecommerce, mail order, and clothing industries.

But how do the BNPL services of the modern day differ from traditional deferred payment methods?

In Japan, buy now, pay later is characterized by flexible repayment methods and a high degree of convenience, making it well suited for ecommerce sites and digital services. On the other hand, traditional deferred payments rely on paper invoices and trust.

Repayment schedule

In Japan, buy now, pay later repayment schedules are often set up so that customers pay for goods or services at the end of the month or the month after the purchase. They might also have the option to pay in installments. In contrast, with traditional deferred payments, the customer receives a paper invoice or an email payment notice when the product is delivered, and they must make the payment by the specified due date.

Risk of non-payment

If the customer doesn’t pay the amount due, the BNPL provider typically takes on the risk. With traditional deferred payment, if a guarantee is in place, the payment processor will make an advance payment on the customer’s behalf. However, if there’s no guarantee, the payment is considered uncollectible, and the business must bear the loss.

Interest

Buy now, pay later is often free for customers in Japan, even when they choose to pay in installments, making it a very appealing payment option for them. In contrast, traditional deferred payments usually involve interest unless the customer pays in a lump sum.

Handling fees for businesses

To offer buy now, pay later as a payment option, businesses in Japan must pay handling fees. These fees are typically higher than those associated with traditional deferred payments. However, it’s important to note that the paper slips involved in traditional deferred payment methods might come with additional costs for issuing invoices.

How is buy now, pay later different from credit cards?

Both buy now, pay later and credit cards allow customers to buy products without paying for them right away. However, the systems and customer experience differ greatly in Japan—let’s take a look at the specific differences:

Interest

Many BNPL services in Japan offer interest-free payment options. If interest is applied, it’s usually minimal. Some providers, such as Paidy, offer special interest-free promotions for up to three installments.

In contrast, credit cards typically don’t charge customers for lump-sum payments, but installment and revolving payments usually come with annual interest rates of around 15%. The total amount repaid can therefore increase significantly as the repayment period gets longer.

Handling fees for businesses

While customers often pay little to nothing to use BNPL, businesses face handling, or processing, fees. The fees to offer BNPL are usually higher than those for credit cards. However, because the buy now, pay later provider takes on the risk of non-payment, the higher fee can still be cost-effective. With credit cards, if there’s no guarantee option, the risk of chargebacks falls on the business.

Wait time after applying

Buy now, pay later is appealing because the customer can begin using it right away after entering their phone number and email address and passing a simple screening. On the other hand, credit cards require a full application, and the physical card is mailed to the customer’s home—usually taking 1 to 2 weeks before it can be used.

Customer screening method

Buy now, pay later providers conduct a basic screening using the customer’s phone number, email, and prior usage history. Credit card issuers carry out a more detailed review, considering factors like annual income, job status, employment history, and credit history. This stricter screening process can prevent some individuals from qualifying for credit cards.

Credit limit

Credit limits for BNPL are generally lower than the limits for credit cards. Because the screening process is less thorough, providers set lower limits to reduce the risk of overuse. Credit card limits can be quite high, so customers must be careful not to overspend.

How big is the buy now, pay later market?

Let’s take a closer look at the market size and predicted growth of the buy now, pay later business model, both in Japan and around the world.

Market size and predicted growth of buy now, pay later globally

The global BNPL market size reached approximately $232 billion in 2024 and is forecasted to continue its growth in the coming years. In 2025, the market is predicted to see a compound annual growth rate (CAGR) of 48.4%, reaching roughly $344 billion. Further, the market is set to see a CAGR of 43.1% from 2024 to 2029, ultimately growing to $1.43 trillion.

Market size and predicted growth of buy now, pay later in Japan

According to a 2025 survey, the size of the buy now, pay later market in Japan was ¥1.53 trillion in 2023, an increase of 121.5% from the previous year. By 2028, the market is expected to reach ¥2.8 trillion.

Advantages of buy now, pay later for businesses

Now, let’s take a closer look at the benefits that buy now, pay later has for businesses.

Improved customer acquisition

Since buy now, pay later can reach people who don’t have credit cards (or who prefer not to use them), it opens the door to acquiring new customers who might otherwise have been left out.

Less cart abandonment

Picture a customer thinking, “I really want to buy this, but I can’t pay the full amount right now. And I don’t want to use a credit card because of the high interest on revolving payments.” Or someone else thinking, “If I could split the payment into installments without interest, I’d go for it.” By offering this kind of flexibility, you give hesitant customers the nudge they need to make a purchase, helping to reduce cart abandonment and lost sales.

Increased average order value

When customers can pay in installments with no added interest, they’re more likely to go for higher-priced items. As a result, businesses often see an increase in the average amount spent per order.

Disadvantages of buy now, pay later for businesses

BNPL offers many advantages, which can make it easy to overlook potential downsides. However, there are a few important factors to consider before adopting this payment method. Understanding these drawbacks in advance can help prevent unexpected issues down the line.

Higher handling fees

Compared to credit card payments, buy now, pay later can be a more expensive payment option for businesses in Japan to offer. For products with low profit margins, BNPL’s higher fees can lessen profits, so it’s important to evaluate carefully which items are eligible for this payment method.

Legal restrictions

One of the key advantages of buy now, pay later is that it enables people without credit cards to make purchases in installments. However, regulatory changes could tighten restrictions on this type of service in the future. If that happens, the benefits might diminish, which could lead to a decline in customer adoption.

Advantages of buy now, pay later for customers

Now let’s take a look at how buy now, pay later services can benefit customers.

Zero interest on installments

Many buy now, pay later services offer interest-free installment payment options. When buying an expensive item, this can significantly reduce costs compared to installment payments on a credit card.

Immediate purchasing power

A customer can purchase products and services immediately, simply by entering basic personal information, such as a phone number and email address.

Low barriers for screening

Even if the customer doesn’t qualify for a credit card, it’s likely that they can still use buy now, pay later. Because there’s usually no credit check for BNPL, many customers see it as a convenient payment method.

Disadvantages of buy now, pay later for customers

It’s also important to consider the potential downsides of buy now, pay later. Understanding why some customers avoid this option can help you decide if it makes sense for your business to offer it.

Late fees

If a customer accidentally misses the payment date or they’re short on money, a late payment fee will be charged.

Risk of overspending

Because its minimal screening makes it extremely accessible, it’s easy for customers to borrow more money than they can afford to repay.

Inconsistent rules

While many businesses offer BNPL services that include interest-free installment options, some businesses might offer BNPL services that charge interest or that do not allow installment payments at all. Since the terms of BNPL services can vary from store to store, customers need to read the fine print carefully before making purchases. This added complexity and effort can make some customers hesitant to use buy now, pay later.

Buy now, pay later providers in Japan

Here are some examples of successful buy now, pay later providers in Japan.

Paidy

Paidy is one of the most widely used buy now, pay later services in Japan. It is also used by major ecommerce businesses, such as Amazon Japan and Apple Japan. Screening is very simple: all it takes is the customer’s email address and phone number. Once approved, customers can immediately buy products and services. Even if they choose to pay in installments, there is no interest applied for up to three payments.

atone

atone is a buy now, pay later service offered by Net Protections, Inc. Customers can start using it with just a simple membership registration and mobile phone number. Payments are made in a lump sum for all purchases within a given month, with the total due by the 10th of the following month. There’s no billing fee when using direct debit, but a ¥209 fee applies for other payment methods like konbini (convenience store payments) or ATMs. To avoid extra fees, customers should make sure their bank accounts are properly linked.

Atokara

Atokara is a new, easy-to-use buy now, pay later service offered by a trio of companies: GMO Payment Gateway, Inc., GMO Payment Service Inc., and Sumitomo Mitsui Card Company, Limited. When shopping, a customer simply selects Atokara as their payment method, enters their mobile phone number and email address, and then inputs the verification code sent to their mobile phone’s social media app to complete the transaction. Purchases made during the month are paid for in a lump sum the following month.

By registering as an Atokara member, a customer gains access to installment payment options in addition to the standard service. Payments can be split into 3 installments, or as many as 36. Interest is waived for up to 6 payments, making it an excellent option for higher-priced purchases. However, membership requires identity verification and a screening process, which can be completed as quickly as the same day but can take up to 4 business days from the application date.

Global buy now, pay later providers

With more businesses in Japan expanding into cross-border ecommerce, it’s likely that offering buy now, pay later services will become a major point of differentiation in the future. These services are also growing in popularity in Europe and the US.

Here, we’ll look at some BNPL services that are popular outside of Japan.

Klarna

First launched in Sweden, Klarna boasts a high global market share and is particularly popular in Europe and the US. Klarna offers flexible, interest-free payment plans—depending on location—including paying in 3 installments, 4 installments, and a 30-day payment option. The provider also offers 6- and 12-month payment plans in which interest is applied.

Although there is an official website in Japan, there are currently no confirmed examples of its adoption in the country. It’s likely that cross-border ecommerce businesses in Japan will mainly use Klarna for selling in overseas markets.

Affirm

Affirm, the leading buy now, pay later provider in the US, offers multiple payment options that vary by location, including some that are interest-free; for example, customers can use Pay in 4, which is 4 interest-free installments paid bi-weekly. There are also plans of 3, 6, 12, 18, 24, 36, or up to 60 installments (paid monthly) with 0% to 36% interest applied. The BNPL provider is known for its transparency, clearly indicating the payment amount in advance. Affirm has partnered with major businesses such as Amazon and Expedia. This could be an effective option for businesses in Japan aiming to enter the US market.

Afterpay

Afterpay was Australia’s first buy now, pay later service. It’s now available in the US, the UK, Canada, and New Zealand. With Afterpay, there are multiple payment plans available, depending on location and order value. For example, there is a Pay in 4 option (4 interest-free payments every 2 weeks within the payment period) and Pay Monthly (the customer makes monthly payments for 6 or 12 months with interest applied). This BNPL service cannot be overlooked for any direct-to-consumer (D2C) ecommerce site looking to expand into Europe and the US. It has been adopted by many stores in the fashion and cosmetics industries, in particular, and has great compatibility with social media.

Klarna, Affirm, and Afterpay are all official partners of Stripe and can be implemented through the Stripe payment platform. For businesses that have already adopted Stripe on their ecommerce sites, multiple buy now, pay later services can be easily integrated through Stripe Payments without any additional development work.

Businesses looking to expand internationally should make sure their payment systems are compatible with global standards to stay competitive. If you’re an ecommerce business owner planning to sell to customers outside of Japan—or if you’re already receiving orders from overseas—be sure to review the necessary legal information based on your target market.

Are there legal restrictions on buy now, pay later?

Here are the current regulations governing buy now, pay later services, both in Japan and overseas.

Legal restrictions on buy now, pay later in Japan

In Japan, there are currently no laws that explicitly regulate buy now, pay later services. However, depending on the details of the transaction and the payment period, there are existing laws that can apply.

Installment Sales Act

If the payment period by customers exceeds two months, the buy now, pay later service falls under the category of “credit purchase facilitation” and is subject to the Installment Sales Act, requiring registration with the Ministry of Economy, Trade, and Industry.

Act on Prevention of Transfer of Criminal Proceeds (Anti-Money Laundering and Terrorist Financing Measures and Reporting of Suspicious Transactions)

Buy now, pay later services that use credit cards are subject to the Act on Prevention of Transfer of Criminal Proceeds, so caution is necessary.

Keep in mind that if the customer’s repayment period does not exceed two months and the buy now, pay later plan is not made using a credit card, these regulations will not apply.

Legal restrictions on buy now, pay later outside Japan

Buy now, pay later is also subject to legal regulations in Europe and the United States due to concerns about customer protection and overuse (i.e., excessive borrowing).

In the US, although there have been no clear federal regulations on buy now, pay later, the Customer Financial Protection Bureau (CFPB) announced draft rules in 2024 that would treat buy now, pay later in the same manner as credit cards. However, in May 2025, the CFPB announced that it would not focus on the enforcement of these rules.

In the United Kingdom, the Financial Conduct Authority is currently working on legislation that would apply to BNPL services, with formal regulations scheduled to be introduced by 2026. There is a growing demand for credit screening and clarification of contracts, in particular.

In Australia, a new customer protection bill regarding buy now, pay later was introduced in 2024. Under this bill, buy now, pay later businesses will be regulated the same as other customer finance providers.

Regardless of the country or region, BNPL is increasingly being treated as a kind of consumer credit, and governments are beginning to determine its legal status. It’s important to remember that cross-border ecommerce sites must comply with the regulations of the countries they do business in, so you must stay up-to-date on relevant regulations.

What to know about introducing buy now, pay later

Let’s take a look at some points to keep in mind when introducing buy now, pay later as a payment method.

Explain the new payment method clearly to customers

Customers in Japan have long made deferred payments for things like public utility bills. Convenience store payments have also been a popular form of deferred payment. But buy now, pay later is a fairly new payment method.

The differences between traditional deferred payment methods and BNPL might not be immediately clear to customers in Japan using this method for the first time. You must therefore clearly distinguish it from other traditional deferred payment methods and credit card payments. It’s important for ecommerce sites to provide detailed information about BNPL. Be sure to plainly state when, where, and how customers will pay, providing explanations and support systems that give them peace of mind.

Be aware of BNPL handling fees and return policies

For businesses in Japan, the handling fees associated with buy now, pay later tend to be higher than those associated with credit card payments. This is because BNPL offers unique added value, such as guaranteed payment, to the business.

If the products or services you sell are low-margin or low-priced, you must consider the possibility that the handling fees will have a negative impact on revenue. Businesses can consider the following measures to reduce the fee burden that they might experience:

• Allow buy now, pay later only for high-priced items
  
• Do not allow discounts when using buy now, pay later
  
• Compare buy now, pay later providers and adopt the service that suits the business’s sales levels
  

Return and cancelation policies can vary depending on the buy now, pay later service a business uses. And because the timing of refunds and cancelation of sales is not identical, a business’s cash flow might be impacted differently. Before introducing BNPL as a payment method, check the specific procedures with the service provider, and make sure that they are suitable for your operations.

Beware of potential changes

It’s possible there will be sudden changes to your buy now, pay later provider’s service, or even complete termination of the service. In fact, some businesses, such as NatWest in the UK and Openpay in Australia, have already withdrawn from providing buy now, pay later services. These businesses have cited various reasons, such as difficulty responding to stricter regulations and deteriorating business conditions.

Be sure to consider risk management measures, such as using multiple payment methods and clearly stating in your terms of use that payment options might change or be removed in the future.

How can businesses introduce buy now, pay later?

There are two main methods for implementing buy now, pay later: contracting directly with service providers, or implementing it through a payment agent.

Direct contract

With this method, you’ll need to sign an individual contract with a buy now, pay later provider, such as Paidy, atone, or Atokara. Then, you’ll need to integrate their service into your website using application programming interfaces (APIs) or JavaScript. While these are highly customizable, technical support is required for implementation.

Here are the steps for implementing buy now, pay later using a direct contract, in order:

• Apply with the provider.
  
• Undergo a screening process.
  
• Acquire API and link systems.
  
• Test the service.
  
• Launch live operations.
  

Payment agent

The process is slightly different if you’d prefer to use a payment agent such as Stripe. Assuming your business already has a cross-border ecommerce site based in Japan, this is how you would implement an overseas buy now, pay later service—such as Klarna, Affirm, or Afterpay—using Stripe:

• Create a Stripe account.
  
• Select “Payments” on the Dashboard settings.
  
• Select “Payment Methods.”
  
• Enable buy now, pay later services.
  
• Test the service.
  
• Launch live operations.
  

This process varies depending on the BNPL provider and payment agent you use. When introducing any of these services, be sure to use the official website or customer support to confirm the process.

Can buy now, pay later increase sales?

Buy now, pay later isn’t just a deferred payment method: it’s a strategic payment method that can enhance the customer experience and drive higher sales. When implementing BNPL, it’s important to choose a provider that aligns with your product offerings, target customers, and sales regions. From there, building a smooth, reliable operational framework helps ensure customer trust and satisfaction.