Shop Pay Installments vs. Afterpay and Klarna on Shopify

On this page 7 sections

1. How Buy Now, Pay Later Works Inside Shopify Checkout
2. Shop Pay Installments Fees, Eligibility, and Limits
3. Afterpay and Klarna on Shopify: Costs Compared
4. Effects on Conversion and Average Order Value
5. Refunds, Returns, and Disputes on Installment Orders
6. Shop Pay Installments vs. Afterpay vs. Klarna: Choosing One
7. Next Steps for Your Shopify Store

Key takeaways

• Every BNPL provider charges the merchant a fee, even when the shopper pays no interest. Check your actual fee in your Shopify admin or provider agreement before you launch.
• Shop Pay Installments sits inside Shopify Payments. Afterpay and Klarna can involve separate setup, payouts and dashboards, depending on how you add them.
• Provider claims about bigger orders come from their own data. Measure order value, returns and margin after fees on your own store.
• Most stores should start with one BNPL option. Add a second only if testing shows it brings in customers the first one doesn't.

Buy now, pay later (BNPL) shows up in nearly every Shopify checkout conversation, but merchants mostly want to know what it costs them. This guide compares Shop Pay Installments fees with the costs of Afterpay and Klarna on Shopify. It also covers who is eligible, what happens to order value, and how refunds and disputes work on installment orders. The goal is to help you choose the right option instead of adding all three and paying for overlap.

Note: BNPL pricing, eligibility rules and supported countries change often and can vary by store. This article describes how these programs generally work. Confirm current rates and terms in your Shopify admin and in each provider's merchant agreement before you decide.

How Buy Now, Pay Later Works Inside Shopify Checkout

Every BNPL option follows the same basic model:

1. The shopper picks an installment plan at checkout.
2. The lender approves or declines the shopper.
3. You get paid for the order, usually minus a merchant fee.
4. The lender collects the installments from the shopper and generally takes on the repayment risk.

On Shopify, a BNPL option can reach your checkout in one of three ways:

1. Built into Shopify Payments. Shop Pay Installments works this way. You turn it on inside your existing Shopify Payments setup.
2. Offered as a payment method through Shopify Payments. In some markets, you can turn on third-party BNPL brands as payment methods inside Shopify Payments.
3. Added through a separate app or integration. You usually sign a separate merchant agreement with the BNPL provider. You also get separate payouts and a separate dashboard.

The path you use affects your costs, your bookkeeping and who you contact when something goes wrong. Before you compare fees, find out which path each provider would use for your store.

What the Shopper Sees vs. What You Pay

A shopper may see "interest-free" or "4 payments," but you still pay a merchant fee. Some longer monthly plans may charge the shopper interest, and lenders may charge shoppers late fees under their own terms. Your merchant fee for longer plans may also differ from the fee on short pay-in-four plans. Don't assume one rate covers every plan type.

Shop Pay Installments Fees, Eligibility, and Limits

Shop Pay Installments is Shopify's own BNPL program. A third-party lending partner, named in Shopify's terms, provides the financing. For many stores it's the easiest option to turn on because it doesn't need a separate agreement or app.

Eligibility

Requirements can change, but access generally depends on:

• Using Shopify Payments as your processor
• Selling in a supported country and currency
• Your store's standing, including your business type and account history
• Product and order eligibility, since some product categories and order types may be excluded
• Order amount limits set by Shopify and its lending partner, including a minimum and a maximum order value

The lender decides whether each shopper is approved. You won't see the credit decision. A decline doesn't stop that shopper from buying with another payment method.

Where to Find Your Shop Pay Installments Merchant Cost

Your Shop Pay Installments merchant cost is deducted from your payout. It should appear in the payment settings and payout reports in your Shopify admin. Before you turn it on, check:

• The fee for each plan type (short-term vs. longer monthly plans)
• How that fee compares with your standard card rate on the same Shopify plan
• Whether you get any of the fee back when you refund an order
• Payout timing for installment orders compared with card orders

If your store has had payout holds before, read why Shopify Payments payouts go on hold and how to respond. A new payment method changes your transaction pattern, and processors watch for that kind of change.

Afterpay and Klarna on Shopify: Costs Compared

Afterpay and Klarna are separate BNPL brands. Each has its own shopper app, lending decisions and merchant pricing. Whether you're looking at Klarna on Shopify or comparing Shop Pay Installments vs. Afterpay, the headline fee is only part of the picture.

Confirm every cell for your store. Pricing and setup options vary by country, plan and business type. Shoppers who already use a particular brand may prefer it at checkout. That's worth checking against your own customer requests.

Costs Beyond the Headline Rate

• Reconciliation time. A separate payout stream means more matching work in your books.
• Settlement timing. Some setups pay out on a different schedule than your card payouts.
• On-site messaging. Each provider wants its "pay in 4" widget on your product pages. Several widgets add clutter and can slow your pages.
• Support load. Shoppers will ask you about their payment plans, even though the lender manages the plans.

Illustrative Cost Math

Illustrative only. These are made-up rates, not any provider's actual pricing.

Say a store sells a $400 jacket. Assume a hypothetical 3% card fee and a hypothetical 6% BNPL fee. The card sale would cost $12 and the BNPL sale would cost $24.

That extra $12 per order is worth paying only if BNPL brings in sales you wouldn't otherwise get, such as new customers, larger carts or fewer abandoned checkouts. If most BNPL shoppers would have paid by card anyway, you're paying more for the same sale.

Effects on Conversion and Average Order Value

BNPL providers often publish figures showing higher conversion and larger orders. Those figures come from their own data across their merchant base, and your store may see different results. Test BNPL on your own store before you rely on anyone's numbers.

Where BNPL Tends to Fit

• Higher-ticket, considered purchases such as furniture, outerwear, electronics, bundles and premium beauty sets
• Stores whose shoppers already use BNPL
• Seasonal peaks, when shoppers want to spread out gift spending

BNPL is often less useful for low-priced consumables or frequent small reorders. On those orders, the fee takes a larger share of a thin margin.

How to Measure It

Track these numbers for at least a few full sales cycles:

• Checkout conversion rate before and after launch
• Average order value of BNPL orders vs. card orders
• Share of BNPL orders from first-time customers
• Return rate on BNPL orders vs. card orders
• Margin after fees, the number that matters most

Your overall checkout experience affects these results too. Before you credit or blame BNPL alone, read whether guest checkout or forced accounts converts better.

Be Careful With Financing Language

If your own marketing advertises specific payment amounts or terms, consumer lending disclosure rules may apply. Use each provider's approved messaging and widgets instead of writing your own claims. If you plan to promote financing heavily, confirm your approach with a qualified professional.

Refunds, Returns, and Disputes on Installment Orders

Installment orders add a third party to every refund and dispute, so plan your process before you launch.

Refunds and Returns

You usually issue the refund in Shopify, the same way you would for a card order. The lender then adjusts or cancels the shopper's remaining installments. Confirm two things in your terms:

• Whether your merchant fee is returned on a full or partial refund. Some programs keep part or all of it.
• How partial refunds work, such as when a shopper returns one item from a multi-item order

Make your return policy clear and easy to find at checkout. BNPL shoppers sometimes expect a return to pause their payments right away. A clear policy cuts down on confused support tickets.

Disputes

When a BNPL shopper disputes an order, the dispute often goes through the lender's process instead of a standard card chargeback. The evidence that wins is the same either way: proof of delivery, product descriptions, customer communications and your posted policies. Response windows and formats vary by provider, so learn each process before your first dispute arrives.

For card disputes, see how to respond to a chargeback on Shopify step by step. Most of the same evidence habits apply to BNPL disputes.

Shop Pay Installments vs. Afterpay vs. Klarna: Choosing One

Offering all three can look shopper-friendly. In practice, each option you add brings another fee schedule, another dashboard or payout stream, more product-page clutter and another dispute process. If shoppers just move from one BNPL brand to another, you add complexity and gain nothing.

When One Option Is Enough

• Your average order value is moderate, and BNPL is still new for your store.
• You already use Shopify Payments, which makes Shop Pay Installments the simplest test.
• You don't have staff time to reconcile several payout streams.

When a Second Option May Earn Its Place

• Your customer data or support tickets show many shoppers asking for a specific BNPL brand.
• You sell internationally, and one provider covers markets the others don't.
• Testing shows the second option brings in new customers, not just card buyers switching payment methods.

Consider Your Processor Setup Too

Your BNPL choice and your processor choice are connected. Shop Pay Installments generally requires Shopify Payments. If you process through a third-party gateway instead, Shop Pay Installments may not be available, and Shopify may charge an additional transaction fee depending on your plan. Before you decide, compare card processing rates, BNPL fees, platform fees and payout reliability together.

MannyPay supports Shopify payment processing and other online payment processing options for e-commerce stores, including high-risk merchants. Whether a third-party setup makes sense depends on your products, your volume and the checkout features you want to keep. Our guide to setting up payments for your online store walks through those trade-offs. If you also sell in person, see which Shopify POS card reader fits your store.

Next Steps for Your Shopify Store

1. Check whether Shop Pay Installments is available in your Shopify admin, and note the fee for each plan type.
2. Ask Afterpay and Klarna, or check Shopify Payments, for current merchant pricing and the integration path for your store.
3. Run the cost math on your typical order using your real rates.
4. Launch one option. Measure conversion, order value, returns and margin after fees for several weeks.
5. Write down your refund and dispute process for installment orders before volume grows.
6. If a BNPL launch lines up with a promotion, read why you should warn your processor before a sales spike.

If you want a second look at your card processing costs while you review BNPL, you can request a free processing quote. A MannyPay specialist will respond within one business day.

ME

About the author

MannyPay Editorial Team

Beyond the Swipe's editorial desk researches the publication's guides and news and cites its sources in every article. Articles reviewed by a named MannyPay editor carry that editor's byline.

This article is for general educational purposes and is not legal, tax or financial advice. Card network rules and state laws change; confirm current requirements for your business.