Australian small and medium businesses (SMBs) using Buy Now Pay Later (BNPL) services are seeing tangible benefits. By providing customers with greater flexibility in payment options, BNPL provides a better customer experience, driving higher conversion rates and increased average order values (AOV).
According to PayPal’s 2025 e-commerce Index, three-quarters of SMBs that have implemented BNPL report increased AOV (75 per cent) and customer conversion rates (74 per cent). On average, SMBs offering BNPL report an AOV increase of 15 per cent and conversion uplift of 11 per cent, after making BNPL available to customers.
As consumers increasingly look for payment methods that allow them to spread out costs, BNPL services have gained traction. More than a third of Australians (37 per cent) now use BNPL, an 11 per cent increase year-on-year.
As evidence of BNPL’s popularity with consumers, businesses that offer BNPL report that 25 per cent of their average online turnover now stems from BNPL transactions. Additionally, more than a third (35 per cent) say promoting BNPL options on their website leads to even higher conversion.
For many small businesses, BNPL also levels the playing field – 39 per cent say it helps them better compete with larger players. This experience rings true for one of PayPal’s customers, Angus and Grace Go Golfing, a small Australian-made golf apparel provider who reported seeing “an immediate and positive impact” on sales after introducing PayPal Pay in 4 at checkout.
Consumers demand flexibility – and BNPL delivers
The rise in popularity of BNPL services highlights the growing consumer preference for payment flexibility, particularly amid cost-of-living pressures.
For consumers, BNPL offers the ability to spread out the cost of purchases over a number of smaller instalments. While many BNPL solutions charge consumers late fees or interest, PayPal’s BNPL solution, Pay in 4, charges no interest and no late fees. Within a year of launch, Pay in 4 became Australia’s second-most popular BNPL offering, with 51 per cent of Australian BNPL users reporting that they’ve used PayPal Pay in 4 at checkout in the past six months.
SMBs may be missing out
Despite consumer demand, only 27 per cent of Australian SMBs currently offer a BNPL solution – potentially leaving money on the table for those businesses who don’t offer it at checkout.
For some SMBs, this reluctance may stem from merchant fees, which can reach up to 6 per cent for certain BNPL services. However, PayPal’s Pay in 4 offers a cost-effective alternative. Available to PayPal merchants at no additional fees beyond their usual PayPal rates, Pay in 4 also requires no additional integration as it’s offered to consumers within the PayPal checkout flow. Moreover, businesses receive payment instantly when consumers use Pay in 4, with PayPal shouldering the risk of customer non-payment – giving sellers added peace of mind.
Consumers also benefit from PayPal Pay in 4’s simplicity and affordability. The service carries no late fees or interest for consumers, and users enjoy the confidence and security of paying through a trusted platform.
Staying competitive in a changing landscape
For SMBs, offering trusted and secure payment options isn’t a nice-to-have, it’s essential in an increasingly competitive digital marketplace. With BNPL growing in popularity with Australian consumers, businesses that fail to provide this option could risk losing customers eager to use BNPL as a tool to spread out the cost of larger purchases.
Ultimately, BNPL is more than a supplementary feature; it’s a strategic asset for businesses looking to grow revenue, meet consumer expectations for payment flexibility, and remain competitive. By recognising the rising demand for BNPL solutions, small businesses can build stronger customer loyalty, increase order sizes, and deliver the payment choices Australian consumers are looking for.
About the author: Peter Santiago is the director of Small and Medium Business (SMB) at PayPal Australia.
- All statistics quoted are from PayPal Australia’s e-commerce Index 2025, conducted by Fifth Quadrant Research, commissioned by PayPal.
- PayPal Pay in 4 is a continuing credit contract provided by PayPal Credit Pty Limited (ABN 66 600 629 258) and is subject to merchant and customer eligibility criteria. Full terms and details are available in the PayPal Credit Guide, TMD and PayPal Pay in 4 facility agreement on our website.
