Shop Pay Installments vs Klarna, Afterpay & Affirm on Shopify

Buy now, pay later is now a checkout expectation, and Shopify gives you two ways to offer it: switch on native Shop Pay Installments, or add a third-party provider like Klarna, Afterpay, or Affirm. This guide compares the two paths on what actually decides it — eligibility, fees, payout, and geography.

Native or Third-Party: The Core Choice

The real fork is simple. Native Shop Pay Installments is the least work: it is built into Shopify, turns on inside your existing setup, and is offered in partnership with Affirm. A third-party provider — Klarna, Afterpay, or Affirm as their own app — is more work to wire up but reaches markets and buyers the native option cannot. The table below is your starting map; the sections after it fill in each row.

One quick reality check before you commit: BNPL is not for every store. If your average order is very low, you sell purely digital goods, or you run on subscriptions, it may add little — jump to when to skip BNPL to see whether that is you before you build anything.

How Shop Pay Installments Works for the Merchant

If you are eligible, the native option is the easiest place to start — nothing to install, no separate contract. Here is what matters for you as the merchant, from who takes the risk to what lands in your payout.

Who underwrites it and who carries the risk

Shop Pay Installments is offered in partnership with Affirm, and that partnership is the whole point for a merchant. Affirm — not Shopify and not you — collects the installments from the customer and takes the credit risk. You get the sale as a normal, fully-paid order; the customer's repayment schedule is Affirm's business.

Eligibility and requirements

Two things have to be true before Installments can appear at checkout: both Shopify Payments and Shop Pay must be activated. If Shopify Payments is not your gateway yet, that is your first step — our guide to Shopify Payments covers setup and eligibility.

Geography is the next gate. Your primary business must be in the United States or Puerto Rico, Canada, or the United Kingdom, with a Shopify Payments payout currency to match (USD, CAD, or GBP). The customer, in turn, needs a billing address in one of those countries and must be signed up for Shop Pay. Eligible orders run from $35 to $30,000 (USD or CAD), or £50 to £30,000 in the UK, including discounts, shipping, and taxes.

One point of confusion worth clearing up: Installments run through Shop Pay, but they are not the same as the Shop Pay express checkout button. That accelerated button and the pay-over-time option are separate features — our guide to Shop Pay vs Apple Pay vs Google Pay covers the express wallets in full.

The plans your customer sees

At checkout, eligible shoppers get a short menu of ways to pay over time. The interest-free biweekly options carry no cost to the customer; the longer monthly plans can carry interest. Those monthly plans are also what makes installments click for big-ticket niches — if that is your world, our furniture-store guide covers the freight and delivery side of the same high-value order.

What it costs and when you're paid

This is where merchants most often misunderstand BNPL. An Installments order carries a single, higher transaction fee — but you are not paying two fees. That one combined rate replaces your standard Shopify Payments card rate rather than stacking on top of it; it is higher because it also covers the pay-over-time service. There is no separate, published Installments rate to quote.

In return, your cash flow does not change: you are paid the full order value within 1 to 3 business days, on your normal Shopify Payments payout schedule. If you want the mechanics of how and when that money lands, our guide to how Shopify pays you goes deeper on payout timing.

The Third-Party Route: Klarna, Afterpay & Affirm

When native Installments does not reach far enough — because of where you or your buyers are — a third-party provider fills the gap. The three big names integrate in noticeably different ways, which changes both your setup work and your fees.

Klarna: local method or standalone app

Klarna is the most flexible of the three on Shopify. You can turn it on as a local payment method inside Shopify Payments in 26 countries, or install Klarna's own app for a broader, self-contained integration that also adds on-site messaging. As a local method it is displayed to shoppers in 19 countries, and only when they check out using their email address. Setting it up also means publishing the storefront information Klarna requires — business and contact details, delivery info, return instructions, the right of withdrawal, product descriptions, and reviews.

On price, Klarna's Shopify app is free to install; you then pay Klarna a percentage plus a fixed fee per order, with the exact rate set by your Klarna contract. Refunds behave much like the native option — if you refund a Klarna transaction, the Shopify Payments processing fee charged on it is not returned to you.

Because Klarna as a local method processes through Shopify Payments, it does not add the separate third-party gateway surcharge you would pay when routing through an outside provider — the mechanics of that surcharge live in our guide to Shopify payment gateways.

Afterpay and Affirm as standalone apps

Afterpay and Affirm are a different shape. Neither appears in Shopify Payments' list of local payment methods, so each is added as a standalone app that connects your store to the provider's own network. Both the Afterpay app and the Affirm Payments app are free to install, with additional charges that depend on the account you negotiate.

None of the three publishes a headline merchant rate, and that is not an oversight — their own financial filings describe the fee as a percentage of the sales volume you process, set by an individual contract that varies by size, category, and region. Providers generally earn a larger fee on interest-free (0% APR) plans. The practical takeaway: you will not find a number online, so treat the rate you are quoted at onboarding as the real one, and get it in writing.

Fee mechanics per each provider's SEC filings (Affirm 10-K, Klarna F-1, Block Inc. 10-K) and Shopify Help Center. No provider publishes a fixed public rate — confirm yours at onboarding.

Where Each Option Works: Geography and Categories

Two filters decide what is even available to you: where you sell and what you sell. Geography rules out some providers entirely; category rules can rule out BNPL for specific products even where the provider operates.

Source: Shopify Help Center (Shop Pay Installments and Klarna) and provider app listings, observed July 2026. Country lists change — confirm current availability with each provider.

Which BNPL Setup Fits Your Store?

You have seen how the native option and the three apps differ on eligibility, fees, and geography. Answer five quick questions about your business and we will point you to the route — native, third-party, both, or none — that fits your situation.

Does BNPL Actually Pay Off?

The upside, measured honestly

BNPL is not a fringe experiment. In the United States it accounted for about 6% of 2024 e-commerce transaction value — modest next to Germany's 20% or Australia's 15%, which tells you where a wider provider like Klarna earns its keep. The chart below maps that spread; it is a single-source market estimate, not official Shopify data.

The US market is also large and, by regulator data, maturing rather than overheating. In 2023 the CFPB's sample of six large lenders — roughly 40% of the point-of-sale financing market — originated 335.8 million BNPL loans totaling $45.2 billion, at an average loan size of $135. Over the same period, both late-fee incidence and loan charge-offs fell versus 2022 — a sign the category is settling, not spiraling.

Here is the honest limit: vendors love to cite conversion and average-order-value lifts, but no provider publishes those numbers with a disclosed methodology. So this guide will not quote a “+X% AOV” figure. Treat BNPL as a way to make larger carts affordable, run it for a defined period, and measure the effect on your own conversion and order values before you decide it earns its fee.

When to skip BNPL

Risks and the Regulation Backdrop

The most common planning mistake is assuming you can simply show every provider at once. Because the three integrate on different rails — native, local method, and standalone app — showing them together is not guaranteed: Shopify's payment customization tools control which methods display (hide, rename, or reorder, up to 25 at once), not whether two lenders will happily coexist. Confirm the exact combination and its rules with each provider before you promise it to customers.

The regulatory backdrop is moving too, and it matters for how these products are marketed. As of July 2026, the UK's Financial Conduct Authority began regulating Buy Now Pay Later (Deferred Payment Credit) on 15 July 2026, meaning lenders now need authorisation or a temporary permission, while agreements entered before that date remain exempt. In the US, the CFPB withdrew its 2024 BNPL interpretive rule in May 2025.

One more boundary worth naming: BNPL is your customer financing a purchase, not your business borrowing working capital. If what you actually need is funding for inventory or growth, that is a different product — our guide to Shopify Capital covers merchant financing.

Turn It On: A BNPL Launch Checklist

Whichever route your quiz result pointed to, the launch sequence is the same skeleton. Steps 1 through 3 apply to everyone; at step 4, native adopters toggle Installments on in the admin, while third-party adopters install and connect Klarna, Afterpay, or Affirm. Tick each step off as you go.

The Bottom Line

There is no single “best” BNPL for Shopify — there is the one your country, cart size, and catalog allow. Get those three right and the decision makes itself; get them wrong and you will spend weeks integrating a provider that cannot serve half your customers.

Frequently Asked Questions