Shopify Payments Expands BNPL Network, Threatening Afterpay and Klarna
Shopify's native buy-now-pay-later expansion gives merchants zero-integration installment options at checkout, putting pressure on third-party BNPL providers that charge 2–6% transaction fees.
By Sarah Paterson ·
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6 min read
Shopify quietly rolled out a significant expansion of its native buy-now-pay-later infrastructure on May 15, 2026, embedding installment payment options directly into Shopify Payments for all U.S. and Canadian merchants — no third-party app required. The move, confirmed in Shopify’s merchant dashboard release notes and corroborated by agency partners briefed on the rollout, positions Shopify squarely against Afterpay, Klarna, and Affirm in a market that processed an estimated $112 billion in U.S. BNPL volume in 2025, according to eMarketer data published in March 2026.
The feature — internally called Shop Pay Installments 2.0 — now supports four-installment, interest-free splits and longer six- to 24-month financing terms powered by a new lending partnership with Affirm, which continues to service the loans on the back end. But critically, merchants using Shopify Payments no longer need a separate Affirm or Afterpay integration to surface BNPL at checkout. The option auto-displays when cart values hit configurable thresholds, defaulting to $50 minimum orders.
📊 Industry News · By The Numbers
📈
112billion
Growth
🎯
4%
Impact
💰
6%
Revenue
⚡
3.29%
Efficiency
What Does This Mean for Merchants Currently Running Afterpay or Klarna?
The operational math is straightforward. Afterpay charges merchants between 4% and 6% per transaction plus a $0.30 flat fee. Klarna’s merchant rate runs 3.29% to 5.99% depending on financing term. Shopify’s native Shop Pay Installments rate sits at a flat 5.99% APR to consumers for longer terms, with a merchant discount rate of approximately 2.9% — effectively the same as standard Shopify Payments processing.
For a merchant doing $80,000 per month in BNPL-assisted volume, the fee differential can exceed $2,400 monthly. Several agency operators told Ecommerce Times they have already begun advising clients to audit their BNPL stack before Q3 planning cycles.
“We’re telling every Shopify merchant we work with to run a 90-day BNPL fee audit before they renew any Klarna or Afterpay contracts. In most cases, the native option either matches or beats third-party rates, and the checkout UX is tighter because there’s no redirect.” — Alexa Morrow, head of growth at Fulcrum Commerce Agency, Chicago
💡 Article Summary
Key Insights
1
What Does This Mean for Merchants Currently Running Afterpay or Klarna?
2
How Is Shopify Framing This Competitively?
3
Which Merchant Categories Are Seeing the Biggest BNPL Lift?
4
What Is Afterpay’s Response to the Shopify Native Threat?
5
Are Amazon and Walmart Marketplace Sellers Affected?
Source: Ecommerce Times
How Is Shopify Framing This Competitively?
Shopify has been careful not to publicly position the rollout as a direct attack on its BNPL partners. Afterpay and Klarna both remain available as app integrations through the Shopify App Store, and Affirm — which powers the Installments 2.0 back end — has a revenue-sharing arrangement that presumably softens the competitive dynamic. But in practice, the default placement advantage that comes with being native to checkout is significant. Third-party BNPL apps typically require manual app installation, custom theme edits, and separate merchant onboarding.
Shopify president Harley Finkelstein, speaking at a payments industry conference in Toronto last week, framed the expansion as a merchant cost-reduction initiative rather than a competitive play: “Our job is to make the economics of commerce better for merchants. If we can save a $2 million-a-year DTC brand $60,000 in payment processing fees, that’s a tangible P&L impact.”
“Our job is to make the economics of commerce better for merchants. If we can save a $2 million-a-year DTC brand $60,000 in payment processing fees, that’s a tangible P&L impact.” — Harley Finkelstein, President, Shopify
Which Merchant Categories Are Seeing the Biggest BNPL Lift?
Internal Shopify data shared with agency partners in a May 12 briefing document — reviewed by Ecommerce Times — shows installment attach rates vary sharply by vertical:
Furniture and home goods: 34% of eligible transactions now include a BNPL selection at checkout, up from 19% in Q1 2025
Consumer electronics: 29% attach rate on orders above $200
Apparel and footwear: 18% attach rate, heavily skewed toward orders in the $75–$150 range
Health and wellness devices: 22% attach rate, with 12-month financing terms outperforming four-installment splits
Auto parts and accessories: 41% attach rate, the highest of any tracked category
Marcus Tran, co-founder of Atlanta-based DTC brand Veloce Cycling Gear, said his store saw a 17% increase in average order value within the first three weeks of enabling Shop Pay Installments 2.0, compared with the 9% AOV lift he tracked when running Afterpay. “The difference is that customers don’t leave the checkout to authenticate with a third-party app. That alone reduces friction enough to push more people to actually complete the installment selection,” Tran said.
What Is Afterpay’s Response to the Shopify Native Threat?
Afterpay, now fully integrated within Block (formerly Square), has not issued a formal public response to the Shopify expansion. However, the company has been accelerating its off-platform strategy — pushing merchants to promote Afterpay-branded financing outside of Shopify checkout through email, SMS, and social commerce placements. Block’s Q1 2026 earnings call, held April 30, showed Afterpay’s gross merchandise volume grew 11% year over year to $5.8 billion for the quarter, though growth had decelerated from 18% in Q1 2025.
Klarna, which filed its updated S-1 prospectus with the SEC in February 2026 ahead of an anticipated U.S. IPO, listed “platform disintermediation” as a risk factor — a thinly veiled reference to exactly this scenario. Klarna CEO Sebastian Siemiatkowski has argued publicly that Klarna’s consumer network of 85 million active U.S. users provides discovery and demand-generation value that a native checkout option cannot replicate.
“A payment button at checkout is not a marketing channel. Klarna drives shoppers to merchants before they ever reach a product page. That upstream value is what justifies our merchant economics.” — Sebastian Siemiatkowski, CEO, Klarna, speaking at the Fintech Nexus conference, May 2026
Are Amazon and Walmart Marketplace Sellers Affected?
The Shopify Payments expansion applies exclusively to Shopify-hosted storefronts and does not affect Amazon or Walmart Marketplace sellers, who operate under those platforms’ own payment rails. Amazon’s own BNPL offering — Amazon Pay Later — is available in select international markets but remains limited in U.S. availability. Walmart Pay’s installment product, piloted in 2024 with Affirm, is live on Walmart.com but does not extend to third-party marketplace sellers.
For brands operating on both Shopify and Amazon simultaneously — a common setup among mid-market DTC operators — the practical implication is a growing payment experience gap between channels. Shoppers completing an order on a brand’s Shopify DTC site will increasingly encounter frictionless native BNPL, while the same shopper on Amazon sees a more limited or absent installment option depending on the product category and seller tier.
Agency operators say this is becoming a talking point in channel strategy conversations. “We’re starting to see brands use BNPL availability on their DTC site as a reason to push higher-ticket SKUs off Amazon and onto owned channels,” said Morrow. “If your $400 item converts 17% better with installments on Shopify than it does on Amazon without them, that changes your channel margin math pretty quickly.”
What Should Operators Do Before Switching Off Third-Party BNPL?
Before deactivating existing Afterpay or Klarna integrations, operators and agency teams should run through a structured evaluation checklist. Several Shopify Plus agency partners outlined the following framework in briefings with Ecommerce Times:
Run a 30-day fee comparison: Export BNPL transaction data from your existing provider and calculate effective merchant discount rates against projected Shop Pay Installments rates at equivalent volume
Audit checkout theme code: Third-party BNPL integrations often involve custom liquid code or app blocks that need clean removal to avoid checkout rendering issues
Check international coverage: Shop Pay Installments 2.0 is currently U.S. and Canada only — merchants with significant UK, Australian, or EU volume may still need Klarna or Afterpay for international storefronts
Evaluate consumer loyalty programs: Klarna’s shopping app and Afterpay’s consumer portal drive some organic traffic; audit whether any measurable referral volume comes through those channels before cutting contracts
Confirm Affirm loan servicing terms: For merchants with high average order values above $1,000, verify that 24-month financing terms are available in your product category under the new Shopify-Affirm structure
The broader implication of the Shopify expansion is a continued erosion of the app ecosystem revenue that third-party fintech providers have depended on since Shopify’s platform growth took off in 2020. With Shopify now natively handling payments, shipping, tax calculation, returns management, and installment financing, the surface area for standalone app monetization is shrinking. That pressure will likely intensify as Shopify’s Summer 2026 Editions release — expected in late June — reportedly includes additional Shopify Payments enhancements targeting B2B net terms and international currency installments.
