Does Shopify Pay Later Increase Conversions? A Deep Dive for Store Owners

Introduction:

Shopify Pay Later, part of the Shop Pay ecosystem, allows customers to split their purchases into four interest-free payments. It’s a powerful “Buy Now, Pay Later” (BNPL) solution that could help reduce cart abandonment and boost conversion rates—but how effective is it really?

In this post, we’ll analyze whether Shopify Pay Later increases conversions, how it influences consumer behavior, and how you can strategically implement it to optimize your Shopify store’s performance.

What Is Shopify Pay Later and How Does It Work?

Shopify Pay Later is powered by Affirm and available through Shop Pay. Here's how it works:

• Customers can split their total into four equal biweekly payments with 0% interest.

• Available for orders between $50 to $17,500 (US-only for now).

• It's seamlessly embedded into the checkout experience if you enable Shop Pay Installments.

Why It Matters:

• BNPL services like Shopify Pay Later cater to a growing demographic of budget-conscious consumers, especially Gen Z and Millennials.

• According to Statista, BNPL usage in the U.S. is expected to reach over $680 billion by 2025.

How Shopify Pay Later Influences Buying Behavior

BNPL taps into consumer psychology by reducing perceived risk and increasing purchasing power.

Key Psychological Triggers:

• Reduced Cart Shock: Breaking a $200 purchase into 4 payments of $50 feels less overwhelming.

• Instant Gratification: Customers receive their product immediately while paying over time.

• Improved Trust: Known services like Affirm and Shop Pay add credibility to your store.

Supporting Data:

• Shopify’s internal data shows that merchants offering Shop Pay Installments saw a 50% increase in average order value (AOV).

• Affirm reported that 64% of users would not have completed their purchase without a BNPL option.

Does Shopify Pay Later Actually Increase Conversions?

YES – Here’s Why:

1. Higher Conversion Rates

   • BNPL reduces friction at checkout, especially for high-ticket items.

   • According to a Forrester Research study, merchants saw a 20–30% boost in conversion rates after integrating BNPL.

2. Reduced Cart Abandonment

   • Cart abandonment typically hovers around 70% in eCommerce.

   • Offering flexible payment can help reclaim 10–15% of those lost customers.

3. Increased AOV (Average Order Value)

   • Shoppers are more likely to bundle items or choose premium options when given payment flexibility.

   • Shopify reports an average AOV increase of 50–60% among stores using Pay Later.

4. Customer Retention & Loyalty

   • Customers who feel empowered financially tend to return.

   • BNPL customers are 23% more likely to make repeat purchases (PYMNTS.com).

How to Add Shopify Pay Later to Your Store

Step-by-Step:

1. Go to Shopify Admin > Settings > Payments

2. Click Manage on Shopify Payments

3. Enable Shop Pay and Shop Pay Installments

4. Customize messaging on product and cart pages for visibility

Pro Tip:

Make sure your store highlights the “Pay Later” option on product pages, not just during checkout. Many customers won’t reach checkout without seeing flexible payment options upfront.

Marketing Tips to Maximize Shopify Pay Later

1. Create Urgency with Limited-Time Pay Later Promotions

   • “Buy Now, Pay Later available this week only” increases FOMO.

2. Use Retargeting Ads Highlighting Pay Later

   • Target abandoned carts and site visitors with dynamic ads that promote split payments.

3. Add “Pay in 4” Messaging to Product Thumbnails

   • Use badges or overlays to show affordability upfront.

4. Leverage Email Marketing

   • Segment customers who abandoned high-ticket items and send them a “Pay Later” email reminder.

5. Use Influencer or UGC Reviews

   • Showcase real people using Shopify Pay Later, reinforcing trust.

Actionable Tips to Improve Shopify Store Conversion

Common Concerns (and Solutions)

❓ Will BNPL Increase My Refunds or Disputes?

Not likely. Affirm handles the payment terms, and Shopify’s system ensures both you and the customer are protected.

❓ Does Shopify Charge Extra Fees?

• Yes-a small fee (usually between 5-6%) per transaction, only when used.

• Many merchants find the ROI outweighs the fee, especially with increased AOV.