Buy Now, Pay Later has become a major part of consumer financing. Federal Reserve researchers estimated that BNPL providers in the United States originated nearly $160 billion in consumer credit in 2025. Furthermore, a separate Federal Reserve survey found that 16% of all adults in the United States used a Buy Now, Pay Later service at least once during that year.
For merchants, adding this functionality is far from as easy as adding a button to the online shop. BNPL providers maintain underwriting policies that determine which merchants they will work with and which businesses they will not. Thus, a company can have an approved high-risk merchant account but get declined by a BNPL provider like Affirm or Afterpay.
Why BNPL Approval Is Different for High-Risk Merchants
For conventional card processing, the bank and card processor decide whether they will take on the risk of the merchant’s transactions. For BNPL, an additional financial provider must approve the merchant and the products that will be financed by BNPL customers.
The providers will evaluate many factors regarding the merchant’s business and products, such as:
- the products and services that are sold by the merchant
- licensing and regulatory requirements to sell those products
- the length of time that it takes to fulfill orders from the merchant
- whether the merchant sells products that can be preordered in advance
- the average value of the orders that are placed by the merchant’s customers
- the return and refund policy for the merchant’s products
- the number and nature of complaints regarding the merchant’s products
- the trading and sales history of the merchant
- the location of the merchant’s business
- if the merchant sells products on an ecommerce website
- the financial risk of the merchant’s customers
Afterpay states specifically that its merchant applications can be denied based on the nature of the goods and services sold by the merchant, the availability of inventory for those goods, whether the merchant takes significant preorder activity for their products, and the merchant’s trading history.
BNPL for merchants must be treated separately from the high-risk card approval process. Approval from high-risk cards does not guarantee approval from BNPL providers.
Afterpay vs. Affirm vs. Klarna for High-Risk Businesses
Provider policies differ substantially. “High risk” also does not always mean prohibited. Some providers completely exclude a category, while others place it under enhanced review.
| Provider | High-Risk Approach | Examples | Best Fit |
|---|---|---|---|
| Afterpay | Merchant applications reviewed for product, inventory, preorder and trading risk | Eligibility depends on individual merchant assessment | Established retailers with physical inventory and a strong fulfillment history |
| Affirm | Maintains a detailed prohibited-business policy | Tobacco, e-cigarettes, certain regulated substances, drug paraphernalia and some other high-risk products are prohibited | Eligible higher-ticket retail and consumer-service businesses |
| Klarna | Separates prohibited categories from restricted categories requiring additional review | Certain age-restricted products, medical services, pawn shops, marketplaces, CBD and travel may be restricted rather than automatically prohibited | Merchants in supported regulated categories that can complete enhanced due diligence |
Afterpay Merchant Approval
An Afterpay merchant application is not approved solely because the retailer has an ecommerce website or existing payment processor.
Afterpay says it considers whether the business:
- sells products or services within its risk appetite
- keeps inventory available for dispatch
- relies heavily on preorders
- has an established trading record
That can make future-delivery businesses, new merchants and certain specialized categories harder to approve.
Afterpay may therefore be a stronger match for established retail businesses with clear fulfillment and customer-service processes than for businesses with long delivery windows or unusual product categories.
Affirm
Affirm works with businesses across many industries, but its current prohibited-business policy specifically excludes multiple regulated and high-risk categories.
Examples include:
- tobacco and e-cigarettes
- certain vaporizers
- controlled or regulated substances
- drug paraphernalia
- pseudo-pharmaceutical products
- certain weapons
- counterfeit goods
- virtual currency
- certain financial services
Affirm states that merchants denied because they fall within its prohibited-business policy cannot use Affirm unless their business later changes in a way that makes it eligible. Other businesses that are not prohibited but still fail direct merchant eligibility may have limited alternative options subject to additional approval.
Klarna
Klarna provides a useful example of why merchants should distinguish between restricted and prohibited businesses.
Its current policies identify several regulated categories as restricted rather than automatically prohibited. Restricted merchants can face license verification, deeper business-model review and additional controls before approval.
Examples currently listed for additional review include:
- alcohol
- tobacco and e-cigarettes
- certain CBD products outside applicable prohibitions
- art and antiques
- auction houses
- digital downloads
- dropshipping
- marketplaces
- medical devices
- medical treatments and services
- pawn shops
- prescription pharmacies
- travel and ticketing
- certain weapons businesses
Approval remains specific to the merchant, market and applicable product restrictions. Klarna also expressly reserves the ability to modify or revoke approval.
That makes Klarna potentially more accessible than some competitors for selected regulated businesses, but “restricted” should never be interpreted as “automatically approved.”
Which High-Risk Businesses Can Use BNPL?
Merchant eligibility changes by provider, market and individual underwriting, but current provider policies create several broad patterns.
| Business Type | BNPL Outlook | Main Issue |
| Conventional retail | Generally strong | Standard merchant underwriting |
| Furniture and electronics | Strong | Ticket size and consumer financing terms |
| Travel | Possible with selected providers | Future delivery and cancellation exposure |
| Medical services | Possible with selected providers | Licensing and provider-specific review |
| Pawn shops | Limited but potentially available | Restricted-category underwriting |
| Digital products | Provider dependent | Immediate fulfillment and dispute exposure |
| CBD | Highly provider and jurisdiction dependent | Product type, jurisdiction and legal requirements |
| Tobacco and vape | Very limited | Many providers prohibit or heavily restrict the category |
| Marketplaces | Possible with enhanced review | Seller oversight and fund-flow complexity |
| Unlicensed gambling | Not viable | Prohibited activity |
| Illegal or counterfeit products | Not viable | Prohibited activity |
The important distinction is between an industry that requires enhanced review and one that violates the provider’s prohibited-business policy.
Merchants should not disguise their product category to gain access. The provider can reassess the account after onboarding and may suspend service when actual sales do not match the approved business model.
How BNPL Works With a High-Risk Merchant Account
BNPL does not necessarily have to be incorporated into the merchant account’s existing setup.
The checkout can accept:
- credit and debit cards
- Apple Pay and Google Pay
- ACH
- BNPL
- other approved payment methods
Payment Nerds can help a merchant decide whether BNPL makes sense for their business in relation to their existing ecommerce gateway and merchant account. The ecommerce services include BNPL options for merchants with qualifying audiences and order values. The BNPL provider must approve the offer for the merchant.
There are several factors to consider beyond whether customers will accept BNPL. These factors include:
- Provider eligibility for the exact products that will be offered
- Merchant fees and the merchant contract
- Minimum and maximum purchase amounts
- Consumer financing options
- Settlement timing
- Refund procedures
- Chargeback and dispute processes
- Ecommerce-platform compatibility
- Reporting procedures
- Marketing and disclosure requirements
The BNPL provider may charge more than a conventional merchant account for handling card payments. The BNPL rates are specific to each merchant, so merchants should request the exact figures from the BNPL provider.
Merchants should be aware of which provider handles which customer issues. Issues related to the product can be handled by the merchant; financing questions may belong to the BNPL provider. Merchants should be aware of the return process for products and the refund procedure for the merchant’s account. Both should be tested before the merchant begins taking orders from customers.
BNPL FAQs for High-Risk Merchants
Q: What is BNPL for merchants?
A: BNPL for merchants allows customers to finance their purchases. The merchant receives their settlement according to their provider agreement.
Q: Which BNPL providers work with high-risk businesses?
A: Klarna has identified several high-risk industries that they do not work with. Affirm prohibits several categories of high-risk merchants from using their BNPL provider.
Q: Can an Afterpay merchant be high risk?
A: Afterpay looks at each merchant application individually to determine if the business is high risk for the customer. Factors considered include the type of products sold, the inventory, and the trading history of the merchant.
Q: Can CBD merchants offer BNPL?
A: Availability of BNPL on CBD merchants is highly dependent on the provider, the type of product and the jurisdiction in which the CBD business is located. CBD merchants are treated as restricted by Klarna under certain conditions, but other providers may prohibit the category altogether.
Q: Can vape or tobacco merchants use BNPL?
A: There are limited BNPL options for vape and tobacco merchants. Affirm prohibits tobacco, vape products and related categories, as do Klarna’s policies regarding age-restricted products.
Q: Can travel businesses offer BNPL?
A: Many BNPL providers do work with travel businesses, but those in the industry are subject to closer review due to the possibility of delivery and refund policies.
Q: Is BNPL the same as credit card processing?
A: No, but many merchants choose to offer both to their customers.
Q: Will having a high-risk merchant account guarantee me that BNPL will approve my merchant account?
A: No, as BNPL will perform their own review of the merchant prior to approving the merchant account, and may have different restrictions regarding the types of industries the merchant accepts as compared to the bank that processes the credit card transactions.
Q: Should I add BNPL to every high-risk merchant website?
A: No, only if it meets certain criteria, such as if the customers demand the product and service, and if the average value of the orders from customers is high enough to justify the cost of adding BNPL as a payment method for customers. Additionally, using cards, ACH or another type of payment method may be a better fit for the high-risk company.
Is BNPL Right for Your High-Risk Business?
BNPL is more accessible in 2026, but not all high-risk merchants can benefit from BNPL offerings. The major difference among BNPL providers is in how they classify the types of business industries that they will accept.
Review the prohibited and restricted business policies for each provider before investing in a BNPL integration for your company. BNPL can offer flexibility to your customers who already have access to your company’s credit and ACH accounts. However, businesses in categories that do not accept these providers will do better with a high-risk merchant account and payment methods that do not require BNPL functionality.
Sources
- Board of Governors of the Federal Reserve System. “Buy Now, Pay Later Beyond Pay in 4.” Accessed August 2026.
- Board of Governors of the Federal Reserve System. “Economic Well-Being of U.S. Households in 2025: Credit.” Accessed August 2026.
- Afterpay. “Why Does Afterpay Decline Some Merchant Applications?” Accessed August 2026.
- Affirm. “Eligibility for Using Affirm.” Accessed August 2026.
- Affirm. “Prohibited Business Policy.” Accessed August 2026.
- Klarna. “Prohibited and Restricted Businesses.” Accessed August 2026.
