📆 Installment payments around the world

Three families of installment payments, and why people confuse them

“BNPL,” short for “buy now, pay later,” means paying for a purchase in installments, with some or all of the price paid after the order. The acronym covers three distinct setups, which differ in where the financing comes from and what technology carries it. The first is third-party-funded installments at checkout, the model of Klarna, Afterpay, Affirm, Alma, and Tabby, offered to shoppers as a payment method in its own right. The second is installments built into the card rail, where the payment plan becomes an option in the authorization message: Brazil's parcelado, Turkey's taksit, Mexico's meses sin intereses, and Argentina's cuotas. The third is pay by invoice, where shoppers receive the goods first and pay afterward. Germany's Kauf auf Rechnung and Japan's atobarai belong to this family.

Which family a product belongs to determines four things. The first is who bears the loss when a shopper defaults. The second is who collects the fee. The third is when the merchant gets paid, and the fourth is which authority writes the rules. Technical integration also differs by family. A checkout built for Klarna exposes a third-party payment method, while taksit and meses sin intereses use fields in the card authorization message, under plans and limits set country by country. An integration written for one family therefore does not work for the other two. Yet all three are sold under the same commercial label, and mixing them up is the most common mistake when entering a new market.

A fourth category falls outside this typology: installment plans with no merchant integration, where the provider finances the purchase without a contract with the merchant. In the UK, Zilch issues a Mastercard accepted everywhere and lets cardholders split their spending as they choose. In the US, Zip has used a virtual card since it acquired Quadpay in 2020. Katapult sells lease-to-own, which is legally distinct from credit. Because they are not integrated, these companies never show up in a merchant's list of payment methods. Yet the volume they finance counts in the installment market.

Who operates where

No installment provider has global reach. The market is mostly made up of national or regional players, and Klarna and Affirm each lead in only a handful of markets. In most countries, the leading offer is local and relies on a domestic bank or a local credit license. Outside Northern Europe and the US, a checkout that offers only Klarna and PayPal therefore captures just a minority of installment volume.

Brands to know before entering a marketKlarnaAFAffirmAFAfterpay / ClearpayPayPal Pay in 4ZIZipAlmaSCScalapayTATabby

Klarna and Affirm: two models with nothing in common

Klarna Group plc and Affirm Holdings are the only two pure-play installment companies that publish detailed audited financials. Yet their main products rest on opposite economics. Klarna mostly sells short, interest-free deferrals funded by the fee it charges merchants. Affirm mostly sells longer-term credit with interest disclosed to the consumer. Comparing their headline numbers therefore requires adjusting for that difference in mix, since the same GMV does not represent the same product.

Two sets of figures show how the product is actually used. The first is frequency of use. Affirm reports about 5.8 transactions per active consumer in fiscal 2025, and 95% of its transactions come from repeat users. That points to habitual use, not one-off purchases. The second is banking customers. Klarna reports 15.8 million banking customers at the end of 2025, who generate $107 in revenue per user, compared with $30 for the average user. In this model, installment payments are the entry product, and some users go on to sign up for the provider's banking services.

When installments live in the card: parcelado, taksit, meses sin intereses

Card-native installments are payment plans chosen at the moment of purchase, inside the normal card flow, with no separate credit application. They are carried by the card rail itself: the shopper chooses between paying in full and paying in installments, from the plans the acquirer has loaded. This model dominates much of Latin America, as well as Turkey, and is also found to a lesser extent in the Middle East. In these markets, the volume involved far exceeds that of all fintech BNPL providers combined.

Brazil shows the scale. Cards there processed R$4.5 trillion in 2025, up 10.1% (ABECS, February 2026). Of those purchases, 42.6% were split into interest-free installments, and 57.1% were paid in full. Of the installment transactions, 64.2% had six installments or fewer, 34% had seven to twelve, and 1.9% had more than twelve. Brazilians therefore access consumer credit mainly by spreading out purchases rather than by taking out separate loans.

Taksit is the installment option built into Turkey's card payment flow. The merchant offers it and funds it. Of the TRY 20,425 billion spent on credit cards in 2025, TRY 3,991 billion went through taksit, or 19.5% (BKM, January 2026). The share is higher online, where 34.4% of card e-commerce is paid in installments. Banking regulation sets the number of installments. Article 26 of the Banka Kartları ve Kredi Kartları Hakkında Yönetmelik (the regulation on bank cards and credit cards) allows the BDDK, Turkey's banking regulator, to cap it by spending category and to ban installments outright for some categories.

In Mexico, meses sin intereses (“months without interest”) is an interest-free monthly installment promotion, tied to the credit card and offered by the merchant at the point of purchase. This promotion shapes the country's credit card balances. As of June 2025, 54.4% of cards in the comparable portfolio had used an installment promotion, with or without interest. Those promotions accounted for 50.8% of total outstanding balances (Banco de México, Indicadores básicos de tarjetas de crédito). Of all outstanding balances, 27.2% came from meses sin intereses, 23.6% from promotional-rate plans, and 49.2% from purchases with no promotion. The weighted average effective rate paid by customers who carry interest-bearing balances is 37.1%. The same portfolio thus combines 27.2% of balances taken on interest-free with a customer base paying that rate.

The economics: who pays, how much, and for what

Providers fund pay-in-4, interest-free for the shopper, from three revenue streams. The first is the merchant fee, charged on every financed order. The second is late fees charged to shoppers who miss an installment. The third, and a growing one, is advertising and affiliate revenue from the traffic the provider's app attracts. Consumer interest only comes into play on longer terms.

Merchant fees fall as the number of providers grows. Across the five leading US players, the CFPB measured an average merchant fee of 3.39% in 2019, 2.91% in 2020, and 2.49% in 2021 (Buy Now, Pay Later: Market trends and consumer impacts, September 15, 2022). The fee fell in each of the three years covered. The trend is structural: as offers multiply, merchants can play providers against each other, and the gap with card acceptance costs narrows.

Late fees are a small part of provider revenue but a much larger reputational risk. The CFPB put them at 0.28% of GMV for the companies it studied. The share of users paying them is rising, however. In 2021, 10.5% of users paid at least one late fee, up from 7.8% in 2020. Supervisors read that increase as a warning sign, not as a revenue line.

The risk, according to public data

Supervisors use the term loan stacking for a borrower taking out several loans from providers that do not know about each other's loans. Short-term installment loans long went unreported to credit bureaus, so a consumer could take on debt with several providers without any of them seeing the others. Research published by US supervisors now measures how widespread this is.

The CFPB analyzed data from six companies (Affirm, Afterpay, Klarna, PayPal, Sezzle, and Zip), collected under market monitoring orders issued in March 2023. Its January 13, 2025, report found that in 2022, nearly two-thirds of loans went to borrowers with low credit scores. Subprime and deep subprime applicants had 78% of their applications approved. About 63% of borrowers held several BNPL loans at the same time during the year. One-third borrowed from more than one provider at once.

Risk also shifts with the product mix, because provisioning depends on how long balances stay outstanding. Klarna's provision for credit losses was 0.65% of GMV in Q4 2025, down from 0.72% the previous quarter. Over the same period, its longer-term credit product, Fair Financing, grew 165% in volume. A loan repaid over several months stays exposed to default much longer than a short deferral, and the provision booked at origination reflects that duration. A loss rate stated against GMV can only be read alongside the matching term structure.

Credit regulation catches up with installment payments

Consumer credit laws traditionally excluded small, short-term, interest-free credit from their scope. Pay-in-4 falls within that exclusion. Short-term installment lending grew there with no lender license and no mandatory affordability check. Jurisdictions are now closing that gap, market by market and rarely in the same way. Effective dates also differ, so a provider active in several markets can be under different regimes on the same date.

Running installments: what breaks, what it costs, what to check

Installment payments happen in two stages: authorization when the order is placed, then collection of the payment schedule over the following weeks or months. Operational problems cluster in the second stage, around returns, partial refunds, cancellations, and disputes. The provider follows a collection schedule fixed at the time of the order, while the merchant handles shipments and returns on dates nobody knows in advance. The two calendars don't line up, and that gap is where problems start.

• Partial refunds: the contract sets one of two methods, either recalculating the remaining schedule or refunding the shopper at the end of the plan. The second leaves shoppers paying installments on goods they have already returned, and it generates complaints at scale.
• Returns after the first installment: the shopper has already paid one installment to the provider, so the refund goes back through the provider. The provider's processing time adds to the merchant's, and the merchant has to state the total in its terms of sale.
• Cancellation before shipping: the shopper must be able to cancel the plan at no cost. Otherwise, the complaint goes to the regulator rather than to the merchant.
• Disputes and liability: under the UK deferred payment credit regime, consumers can take complaints to the Financial Ombudsman Service. When a complaint reaches the ombudsman, the provider then turns to the merchant over the underlying sale.
• Display order: in Sweden, a non-credit payment method must appear first, and no credit option may be preselected. A single checkout rolled out across several countries can break this rule without anyone noticing.
• Reconciliation: fintech BNPL settlements arrive net of fees, in batches that don't map to individual orders. Matching them requires an order ID in the settlement file, which you need to get from the provider before go-live.

Providers are chosen market by market, not in a single decision for a whole group. Usage varies widely from one country to another. In the Gulf, leaving Tabby and Tamara out of the checkout costs a merchant volume that neither Klarna nor PayPal will make up. In Brazil, a merchant without a parcelado plan loses out to competitors that offer one, whatever its prices. In Japan, pay by invoice at the konbini reaches shoppers that credit cards don't reach online.