Pay later can raise what shoppers spend, and the return decides whether that spending stays an order
The case for putting a pay-later option in the checkout is usually made with an uplift percentage. Independent evidence is thinner, and what there is points to a mechanism rather than a percentage you can plan with. It also leaves out the part of the purchase where a larger basket is most likely to cause trouble: the return. A merchant who adds pay later for the bigger order has to build the route back as carefully as the route in.
What the independent evidence shows
One academic study that measures the effect directly is a working paper published by the National Bureau of Economic Research in September 2022. Marco Di Maggio, Emily Williams and Justin Katz built a panel of US pay-later users from transaction data and followed what happened when those users gained access to the product. Total spending went up, and so did the share of that spending going to retail. The authors find the increase too large to be explained by shoppers simply moving purchases forward in time, and they describe it as a “liquidity flypaper effect”: extra liquidity offered at a retailer tends to be spent there.
Two limits travel with that finding. It measures the spending of US users, not the conversion rate or the order value of a particular shop. And it says where extra spending lands, not whether the shopper keeps what they bought. A checkout that turns hesitation into a larger order has done half the job.
A pay-later order has to survive the return
The US Consumer Financial Protection Bureau published its market study in September 2022, based on data from five pay-later lenders for 2019 to 2021. In 2021 those firms originated 180 million loans. The average order value was $135, up from $121 a year earlier, and 73% of applicants were approved. The figure that matters most for the checkout is a different one: 13.7% of individual loans in 2021 had at least part of the order returned, up from 12.2% in 2020. In the same year, 10.5% of borrowers were charged at least one late fee.
The study also describes what a return looks like from the shopper’s side. All five lenders told borrowers with a problem to contact the merchant that sold the product. Once the merchant processed the return, the refund reached the borrower after a delay, and in a dispute a borrower could be required to keep paying instalments until it was resolved. These are US figures for 2021 and earlier, and practices may have changed since. The basic set-up follows from the product itself. A shopper who pays later has three things running at once after the order: the parcel, the return and a payment schedule held by a third party. If the parcel is back in your warehouse and the next instalment is still due, the shopper will be sent to the shop for an answer, as all five lenders in the study did.
Partial returns make this sharper. A shopper who orders two sizes and keeps one expects the schedule to shrink accordingly, and expects to see that happen soon after the parcel arrives. Whether it does depends on when your system tells the provider that the return is in.
European law ties the credit to the purchase
The revised Consumer Credit Directive, Directive (EU) 2023/2225 of 18 October 2023, brings buy now, pay later schemes within its scope. Three of its points reach the checkout directly. Where a consumer withdraws from the purchase, they should no longer be bound by the linked credit agreement. Silence, inactivity or a default option such as a pre-ticked box does not count as the consumer’s agreement to credit. And credit advertising may not encourage consumers to take credit by suggesting it would improve their financial situation.
In the Netherlands, the explanatory memorandum to the Dutch implementing bill states that the directive should have been transposed by 20 November 2025 and that its rules must apply by 20 November 2026 at the latest. The bill removes the current exemption for credit repaid within three months, which is what has kept pay-later services outside the Dutch credit rules, and requires their providers to assess the creditworthiness of the shopper. The pay-later route in your checkout may change as a result, in its wording and in the steps the shopper goes through before approval.
Build the return into the pay-later route
Treat the pay-later option as a promise that runs until the last instalment, not until the order confirmation. Four checks follow from that. First, the payment step: pay later should never be the preselected method, and the line on your product pages should describe the payment arrangement, not what it does for the shopper’s budget. Second, the confirmation email and the returns page: tell the shopper in one sentence what happens to their instalments when they send back all or part of the order. Third, the warehouse: register a return with the provider on the day the parcel arrives, item by item, rather than in a weekly refund run. Fourth, customer service: make sure the team can see the refund status for a pay-later order without asking the shopper for a screenshot of their app.
Then measure it. Pull last quarter’s returned orders, split by payment method, and record the number of days between the parcel arriving and the refund being registered. Do one partial return yourself on a pay-later order and watch what the shopper sees in each message. If the pay-later orders take longer to settle than the rest, that is the first thing to fix, before you move the option higher on the page.
Sources: nber.org, consumerfinance.gov, eur-lex.europa.eu, officielebekendmakingen.nl
