Currency Issues with Buy Now, Pay Later Installment Plans
Cross-border ecommerce purchases using Buy Now Pay Later (BNPL) services are becoming increasingly popular, but they come with higher fees compared to local transactions. These fees include base transaction fees, international fees, currency conversion fees, and additional charges like chargeback/dispute fees and VAT or consumption taxes.
Base fees, which typically range from 1.5% to 3.5% plus a small fixed fee (~€0.25 or $0.10–$0.30), are common among BNPL providers. International payment fees, added when the transaction crosses borders (especially outside regions like the European Economic Area), can increase the cost by approximately 1.5% to 2.0%. Currency conversion fees, if currency exchange is involved, can add another 1–3% markup on the exchange rate.
BNPL payments incur higher fees than regular card payments. For instance, Stripe notes that BNPL fees tend to be more than credit/debit cards, and PayPal's Pay Later option charges about 4.99% + $0.49 per transaction, which is significantly higher than other payment methods.
Providers like WooPayments charge a 1.5% + €0.25 base fee for card payments, an additional 2.0% for international transactions outside Europe, and another 2.0% for currency conversion. Apaya.io transaction fees range from 1.5% to 3.5% plus fixed fees, with 1–3% currency conversion markup and $15–$25 chargeback fees.
When using BNPL for cross-border ecommerce, shoppers can expect around 5-7% or more total fees, combining base, international, currency conversion, and BNPL rate premiums. These fees vary by provider, transaction region, and currency used.
Despite the higher fees, BNPL services like Klarna and ZoodPay are expanding their cross-border offerings. Klarna's BNPL service supports payments in 190 markets globally, and its cross-border BNPL services are available to shoppers in its 10 core markets. ZoodPay, which launched the first cross-border BNPL service in the Middle East, has yet to disclose the specifics of how foreign exchange will be handled in its service.
As the BNPL industry continues to grow, handling foreign exchange within these products is expected to become more sophisticated. However, the complexities of changing FX rates during the BNPL time period make adding FX to BNPL services a challenging task.
Sources: [1] WooPayments: https://woopayments.com/pricing/ [2] Stripe: https://stripe.com/gb/pricing [3] Stripe: https://stripe.com/gb/payments/buy-now-pay-later [4] Apaya.io: https://apaya.io/pricing/ [5] PayPal: https://www.paypal.com/uk/webapps/mpp/pay-later-fees
- The higher fees associated with cross-border ecommerce transactions using Buy Now Pay Later (BNPL) services, such as additional charges for international payments, currency conversion, and BNPL rate premiums, can result in a total fee of around 5-7% or more.
- As Buy Now Pay Later (BNPL) services like Klarna and ZoodPay expand their cross-border offerings, handling foreign exchange within these products will become more sophisticated, but the complexities of changing FX rates during the BNPL time period make adding FX to BNPL services a challenging task.
