Why is a Giant Retailer Building a Buy Now, Pay Later Business?

It must be the money!

Andy Spears
3 min readDec 18, 2022
Photo by Marques Thomas on Unsplash

I noted recently that Walmart is building a Buy Now, Pay Later application as a way to keep more revenue as the short-term financing solution gains popularity.

However, it’s not merely about capturing revenue.

explains more about the BNPL revenue model.

How BNPL Services Are Gouging Businesses | by Kim Rowley | Nov, 2022 | Medium

In short, these companies — Affirm, Afterpay, Sezzle, Klarna, and others — charge merchants a fee in order to facilitate purchases.

A customer may not have all $200 for an item (or may not want to spend $200 right now) — so, instead of leaving the store or website without the product, BNPL offers merchants a sale. The BNPL company pays the merchant now and the customer pays the BNPL company over time.

This means 25% of the total purchase price up front and the remainder paid every two weeks over a six week period.

The customer gets the product now, the merchant gets paid now, and the BNPL provider services the process — getting paid by the merchant for providing convenience.

But as Rowley notes, all that convenience comes at a cost.

According to this article, the typical merchant fee for Affirm is 5.99% + 30¢ per transaction. Compare that to the typical processing fees for Square, which I personally use to process payments, which is 2.6% + 10¢ per transaction.

So, we’ve established that Affirm charges the merchant roughly 6% to process transactions. And according to a 2021 publisher media kit, Affirm was asking for at least 8% commission to even integrate a merchant. For 10% commission, the merchant would get a dedicated merchant page and optimized premium placement across their homepage or categories. And for 12%, Affirm would offer 0% financing, dedicated page and placements on homepage and categories.

Add in the average 2% network fees and another 2% for program manager fees, and merchants are paying out over 20% of their revenue to Affirm which makes it hard to maintain a healthy profit margin.


No wonder Walmart wants to develop a BNPL platform.

Giant retailers like Walmart can likely afford to handle these steep fees charged by BNPL operators — but, they’d rather not.

Will be interesting to see if Walmart boots out the other providers and if Walmart offers its BNPL platform to other retailers. This way, even if you aren’t shopping at Walmart, the big blue discount retailer is still collecting some cash.

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Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .