CNN BUSINESS | ‘Buy now, pay later’ is becoming a huge business

London (CNN Business) – Want to buy a new coat without shelling out the entire cost upfront? For shoppers, that’s becoming an increasingly popular payment option — generating a windfall for the handful of companies that facilitate such services.

What’s happening: Square, which owns the Cash App, announced Sunday that it’s buying Afterpay for $29 billion, the largest acquisition of an Australian company ever.

Meanwhile, Sweden’s Klarna raised money in June at a nearly $46 billion valuation. Affirm, a San Francisco company that went public earlier this year, is now valued at nearly $15 billion (and its stock is up 8% in premarket trading).

How it works: These companies partner with retailers like Target (TGT), H&M, Sephora, Macy’s (M) and ASOS (ASOMY) online or in stores to offer customers the option at checkout to pay in installments. That lets shoppers snap up a $200 handbag for the cost of just $50 initially without having to undergo a credit check. The remainder is paid off in chunks over the coming months, often without interest.  —read more—