Prompt Pack Bnpl Platform Agreement

BNPL Platform Agreement

When to use this

Use this skill when a BNPL (buy-now-pay-later) provider needs a platform agreement with a merchant who will offer BNPL as a payment option to that merchant's customers. The BNPL provider takes on the credit risk of the customer; the merchant receives payment (net of fees) from the BNPL provider.

This agreement defines the commercial and legal relationship between the BNPL provider and the merchant. A separate (B2C) agreement governs the relationship between the BNPL provider and the end customer — that is not this document.

Relevant for:

• BNPL fintechs expanding their merchant network in MENA
• E-commerce platforms seeking BNPL partnerships
• Banks and licensed lenders offering BNPL as a product
• Merchants assessing BNPL provider terms

Prompt template

Draft a buy-now-pay-later platform agreement between [BNPL Provider] and [Merchant]. Include integration requirements, payment terms, merchant fees, customer credit assessment, default handling, returns/refunds, and consumer credit regulation compliance.

Use [[conversation-clarifying-questions]] to elicit [bracketed] inputs before drafting.

Required inputs

Document structure

1. Parties and recitals

• Full legal names and jurisdictions; licensing/regulatory status of the BNPL provider
• Recital: the BNPL provider is licensed to provide deferred payment or credit services; the merchant wishes to offer this service to its customers

2. Definitions

Key defined terms for BNPL agreements:

• BNPL Transaction: a customer purchase where the BNPL provider finances the purchase price
• Settlement Amount: the amount the BNPL provider pays the Merchant (typically purchase price minus Merchant Discount Rate)
• Merchant Discount Rate (MDR): the fee the merchant pays to the BNPL provider, expressed as a percentage of the transaction value
• Instalment Plan: the customer's repayment schedule
• Chargeback: a disputed transaction reversed by the BNPL provider
• Eligible Purchase: transactions that qualify for BNPL (above/below certain values; not certain product categories)

3. BNPL service

3.1 Service description

• The BNPL provider will offer an instalment payment option at the merchant's checkout (online and/or in-store)
• The provider will assess the customer's creditworthiness and approve or decline the BNPL application
• On approval, the provider pays the merchant the Settlement Amount; the customer repays the provider over the agreed instalment schedule

3.2 Customer credit assessment

The merchant must understand (and the agreement must state):

• Credit assessment is entirely the BNPL provider's responsibility; the merchant has no input into individual credit decisions
• The provider may decline any transaction at its discretion; the merchant has no claim for a declined transaction
• The merchant must not imply that BNPL approval is guaranteed
• The provider's credit assessment methodology, data sources, and criteria are proprietary — the agreement does not require disclosure to the merchant

3.3 Customer terms

• The customer's instalment agreement is between the customer and the BNPL provider only
• The merchant is not a party to the customer's instalment obligation
• The merchant is paid whether or not the customer repays the provider (the provider takes the credit risk — this is the merchant value proposition)

4. Merchant obligations

4.1 Integration

• Technical integration via API or embedded widget as specified in the technical specification (Schedule A)
• Merchant must not modify the BNPL payment flow without provider approval
• Merchant must display BNPL option clearly and in accordance with the provider's branding guidelines
• Merchant must not represent BNPL terms to customers other than those approved by the provider

4.2 Eligible purchases

• Minimum and maximum transaction amounts
• Excluded categories (typically: gambling, adult content, weapons, cryptocurrency, financial products — list specifically)
• Geographic restrictions: BNPL is only available to customers in specified territories

4.3 Customer information

• Merchant must provide accurate transaction information to the provider at the time of BNPL application
• Merchant must not encourage customers to apply for BNPL with false information

4.4 Compliance obligations

• Merchant must comply with all applicable law in the jurisdictions where it operates
• Merchant must not offer BNPL in jurisdictions where the provider is not licensed

5. Payment terms — Merchant Settlement

5.1 Settlement process

• The provider will settle the Settlement Amount to the merchant within [X] business days of the BNPL transaction being approved and goods/services delivered/provided
• Settlement is net of the Merchant Discount Rate
• Settlement schedule: daily, weekly, or per batch (specify)

5.2 Merchant Discount Rate (MDR)

• Define the MDR (e.g., 2.5% of transaction value)
• Whether MDR varies by product category, transaction size, or jurisdiction
• Right to adjust MDR: notice period; merchant's right to terminate if new MDR is not acceptable

5.3 Currency and withholding

• Settlement currency
• Cross-border payments: withholding tax obligations; gross-up clause (or not)

6. Default handling and chargebacks

6.1 Customer default

• When a customer fails to repay the provider, this has no effect on the merchant — the merchant has already been paid (net of MDR). The credit risk is the provider's.
• Exception: if the transaction was fraudulent and the merchant was involved, the provider may claw back the settlement (see fraud provisions)

6.2 Merchant chargebacks

A chargeback is a transaction the provider reverses against the merchant, typically because:

• The customer disputed the transaction (non-delivery, wrong item, fraud)
• The transaction was unauthorized or involved merchant fraud

Chargeback process:

• Provider notifies merchant of chargeback
• Merchant has [X] days to dispute with supporting evidence (proof of delivery, authorization records)
• Provider makes final determination
• Chargeback amount is set off against future settlements or charged back to merchant

Chargeback liability rules: merchant is liable for chargebacks resulting from merchant fraud or non-delivery; merchant is not liable for customer credit defaults.

7. Returns and refunds

• When a customer returns goods and is entitled to a refund, the merchant must notify the provider within [X] business days
• Provider reverses the instalment plan and issues a refund to the customer
• Merchant reimburses the provider the Settlement Amount (but not the MDR) within [X] days
• Partial refunds: provider adjusts the instalment plan; recalculates remaining instalments

8. Consumer credit regulation compliance

This is the most legally significant section in the MENA context. BNPL straddles the boundary between payment services and consumer credit regulation:

Sharia-compliant BNPL note: in KSA and UAE Islamic markets, BNPL is often structured as a murabaha (cost-plus sale) rather than a loan — the provider purchases the goods and sells them to the customer at a profit margin, with deferred payment. The platform agreement should reflect the structure used.

Compliance obligations in the agreement:

• BNPL provider must maintain required licences
• Agreement must permit the merchant to comply with applicable consumer protection law
• Merchant must not misrepresent BNPL terms to customers
• Both parties must cooperate with regulatory enquiries

9. Data and privacy

• Customer personal data is processed by the BNPL provider (the credit assessment process)
• Merchant receives transaction status but not the customer's credit information
• Data processing agreement (DPA) should be embedded or attached — required under UAE PDPL, DIFC Data Protection Law, GDPR
• Data minimization: merchant should only receive the minimum customer information needed for its records

10. Intellectual property

• The BNPL provider licenses its branding, logo, and checkout widget to the merchant for use in the BNPL presentation
• Merchant may not modify the materials
• License terminates on termination of the agreement

11. Term, suspension, and termination

• Term: typically 12–24 months; auto-renews unless notice given
• Suspension: provider may suspend merchant from the BNPL platform for fraud suspicion, high chargeback rate, compliance breach — with immediate effect in serious cases
• Termination: by either party on [60/90] days' notice; for cause (material breach, insolvency, licence revocation) on [5/10] days' notice or immediately
• Effect of termination: transactions already processed continue per their instalment schedule; no new BNPL transactions after termination

12. Liability and indemnity

• BNPL provider's liability cap: typically the settlement amounts paid to the merchant in the preceding [3/6/12] months
• Mutual exclusion of consequential damages
• Merchant indemnifies provider for: merchant fraud; misrepresentation to customers; non-delivery of goods; breach of the agreement

13. Governing law and dispute resolution

• Jurisdiction-specific choice (DIFC law + DIFC arbitration for UAE cross-border; English law + ICC for international)
• Consider DIAC arbitration for UAE domestic disputes

Jurisdictional notes

UAE

CBUAE has been developing a comprehensive BNPL regulatory framework. Providers must monitor CBUAE guidance actively — the framework is evolving. The critical question is whether the specific BNPL product structure requires a personal finance licence (if it involves finance charges) or falls under payment services (if truly interest-free deferred payment). Get legal advice on structure before launch.

KSA

SAMA has required BNPL providers to operate through licensed finance companies (Tamwil companies) or banks. Pure technology BNPL platforms not directly providing credit must partner with a licensed finance entity. Sharia compliance is mandatory — interest-bearing BNPL cannot operate in KSA.

Common mistakes

• Not addressing the precise regulatory characterization of the BNPL product (credit vs. payment service)
• Inadequate chargeback procedures (the most common operational dispute in BNPL agreements)
• No data processing agreement — required in all major MENA jurisdictions
• Merchant liability for customer credit defaults (this reverses the commercial proposition of BNPL for merchants)
• No refund mechanism — the settlement economics break down without a clear refund process

Related skills

• [[prompt-pack-aml-kyc-policy]] — AML obligations that apply to BNPL providers
• [[kb-fintech-regulation-mena]] — MENA fintech licensing and regulatory reference
• [[heuristic-always-state-jurisdiction-first]] — consumer credit regulation is strictly jurisdiction-specific
• [[prompt-pack-agreement-legal-draft-review]] — reviewing a BNPL agreement presented by a counterparty