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.

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The study found that 91 per cent of small-business owners are experiencing work-related stress in the past 12 months, with a lack of sales (34 per cent), time pressures (33 per cent), poor work-life balance (28 per cent), keeping up with technology (28 per cent), and managing cashflow (28 per cent) cited as top contributors.

Furthermore, the research found that business owners admit they lack time for relaxation and exercise (34 per cent), or to spend with family or friends (27 per cent), and a quarter (23 per cent) are suffering from insomnia or poor sleep. Almost a quarter of respondents, 22 per cent, said that the stress of business is causing strain on their relationships and 20 per cent said they are feeling depressed about business. Unfortunately, 38 per cent shared that taking time off to relieve their burnout was not possible due to work pressures.

While many factors are beyond their control, there are steps small-business owners can take to help protect themselves to reduce the risk of harm, according to Dr Marny Lishman, a health and community psychologist based in Perth.

Dr Lishman has worked with many start-ups and small-business owners to help them reach their potential and overcome psychological challenges such as burnout which is a state of mental, emotional, and physical exhaustion usually caused by chronic stress or prolonged negative emotions.

“Small-business owners are susceptible to burnout because of their excessive workloads, financial pressures, lack of resources and lack of time allocated to looking after their own physical and mental wellbeing,” Dr Lishman explained. “Owning a small business is inherently stressful, right from the development phase, so it’s important that business owners make sure they have adequate support in place from the beginning.

“It’s crucial that they make time for their own self-care to mitigate the stress they are likely to feel,” he added. “This means making time for physical activity, socialising, sleeping, resting, and relaxing, spending time with family or doing hobbies, and delegating work-related duties to other people when they can.”

He said that while it can seem impossible to take time away from the demands of running a business, good mental health is a prerequisite for business success, not a nice-to-have. He recommended that small-business owners have a psychologist, coach, mentor or trusted friend to debrief with throughout the challenges of owning a business.

“I’m not a mental health expert, but I’ve spoken to enough small-business owners to understand how isolating it can be,” PayPal Small Business Success Expert, Vanessa Patrizi, said. “The good news is, support is out there, and no one needs to do it alone. I encourage all small-business owners is to find the people and partners that can help you, and reach out before it becomes urgent.”

A range of mental health and wellbeing resources are available at business.gov.au including free and confidential coaching, tools, resources, and communities.

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In particular, 38 per cent of Aussies are looking to keep Christmas costs in check by shopping online during sales periods, with 49 per cent saying one can still have a great holiday season if they spend wisely, leverage online sales, and shop sensibly.

This year, most gifts will be purchased digitally with 81 per cent opting to buy gifts online and 62 per cent of Australians saying they will buy at least half their gifts online. This reflects the finding that 47 per cent have said that the worst thing about Christmas is the overcrowded stores. Other reasons Australians shop the sales online is to have a faster and easier shopping experience (42 per cent) and get better deals and prices (40 per cent).

Aside from shifting to online shopping, other cost-cutting measures for the holidays include spending less on gifts (39 per cent), decorations and lights (also 39 per cent), alcohol and drinks (35 per cent) or travel and fuel (34 per cent). On the other hand, 25 per cent have said they would not cut their spending at all this year.

Despite the cost-cutting measures, Aussies in general remain positive about the holidays with 24 per cent saying that Christmas is still the best time of the year, 50 per cent looking forward to Christmas and only 15 per cent saying they’re not looking forward to the festive season this year.

PayPal’s research also noted that Aussies use a number of tactics to manage the madness of the holiday period. 42 per cent have said that they don’t compare their Christmas to other people’s, and 35 per cent say they set a budget and stick to it. Other tactics involve making sure they don’t eat or drink too much (29 per cent), make sure they get enough sleep (27 per cent) and creating a Christmas ‘to-do’ list to help stay organised (27 per cent).

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This insight comes a year after a series of high-profile data breaches impacted 47 per cent of the population within the space of four months. As a result of these attacks, 76 per cent of those affected have said that the breaches caused harm.

The breaches have also impacted consumers. As a result, 74 per cent of them said they are more concerned about their online safety than they were a year ago. Moreover, 37 per cent have abandoned online purchases due to security concerns or because their preferred payment option was not available at checkout.

The top areas of increased concern for Australian small businesses revealed by the research are scams becoming more sophisticated (53 per cent), the safety and security of business data held by other organisations (43 per cent), and cyber criminals impersonating suppliers, vendors and service providers (41 per cent). Businesses also have heightened fears about their business bank account becoming compromised (41 per cent), the cost and complexity of staying ahead of cyber criminals (40 per cent), and credit card and customer fraud (40 per cent).

PayPal’s research highlights the fact, however, that SMEs are taking action to improve their cybersecurity, with 85 per cent having already taken at least one step to increase their digital security, including: backing up data and implementing a data recovery process (50 per cent); encouraging employees to treat calls, emails and texts with more suspicion (48 per cent); and enabling two-factor authentication or other controls for employee access to systems (38 per cent). However, only 34 per cent have enabled fraud protection for their eCommerce sites or have introduced or increased employee security training and just 32 per cent use encryption for important information.

“Cybersecurity is an essential investment no matter how small your business is,” Daniela Fernandez, Head of Information Security at PayPal, said. “The threat to businesses posed by scams, hackers and cybercriminals is likely to remain an unwelcome feature of the commercial landscape for the foreseeable future. And it’s not only big enterprises that are at risk. Small businesses are just as vulnerable, if not more so.

“While cybercriminals may not seek the same level of impact or notoriety by breaching small businesses, they are still targeting them for funds and data,” Fernandez added. “That’s why protecting yourself and your small business should be a top priority. Simple steps like applying regular software security patches and keeping your software up-to-date, using latest anti-virus software, using strong password, turning on multi-factor authentication, training your staff, and doing frequent back-ups can make your business a tougher target.”

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According to ASIC, the contract term gives PayPal business account holders 60 days to notify PayPal of any errors or discrepancies in fees that PayPal has charged them, or else accept those fees as accurate.

The term appears in PayPal’s User Agreement, one of several documents that form the contract between PayPal and its Australian business account holders.

ASIC stated that this term is unfair because it would permit PayPal to retain fees it has overcharged or wrongly charged if the small business does not notify PayPal of the error within 60 days of the fee appearing in its account statement.

“ASIC has commenced this action to protect the interests of small businesses,” ASIC Deputy Chair Sarah Court stated. “We allege this term is unfair because it allows PayPal to escape the consequences of its own errors in overcharging small businesses, and places additional burdens on small businesses to detect and correct charging errors.”

ASIC further stated that the contract term is unfair within the meaning of s12BG of the ASIC Act as the term:

• “causes a significant imbalance in the parties’ rights and obligations under the contract”
• “is not reasonably necessary to protect PayPal’s legitimate interests,” and
• “would cause detriment to PayPal business account holders if the term were relied on.”

Since 1 July 2010, the unfair contract term regime contained in the ASIC Act has applied to standard-form consumer contracts for financial products and services. On 12 November 2016, the unfair contract term regime was expanded to include small business contracts.

Furthermore, on 9 November 2022, the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 was assented to, which will impose civil penalties under the ASIC Act for breaches of the unfair contract term prohibition from 10 November 2023.

In light of PayPal’s alleged unfair contract term, ASIC has sought declarations that the term is void. ASIC is also seeking injunctions and corrective orders.

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The survey took note of the four biggest potential threats to SMEs over the next 12 months: high cost-of-living impacting consumer spending (59 per cent), rising energy and fuel prices (52 per cent), maintaining a steady cashflow (37 per cent), and increasing cost of materials and other supply chain issues (25 per cent).

The report shows that 71 per cent of small businesses feel the current economic climate is equally or more concerning than COVID-19’s impact on the economy, and 74 per cent say that they have suffered sleepless nights due to worries about their business.

Despite the fears and concerns, many Australian SMEs remain optimistic, with 82 per cent expecting to be in business 12 months from now, thanks to taking control of the financial health of their business. Over half of respondents, 55 per cent, said that learning from past mistakes was key, and 34 per cent say they have upskilled themselves with technology, including learning to use financial management software.

Notably, 16 per cent admitted taking the “head in the sand approach” to their finances, agreeing that they ignore the financial health of their business because they’re worried about what they’ll find out. By contrast, 66 per cent monitor their finances systematically and are closely across the details of their business’s financial position.

“If there’s one thing the COVID-19 pandemic taught us, it’s the resilience and adaptability that Australian small businesses can show in the face of tremendous adversity,” Vanessa Patrizi, Head of Small Business at PayPal Australia, said. “Despite the challenges, most small businesses expect to navigate this period of uncertainty by using past learnings and digital-first approach to prosper. It is during these times of adversity that some of the biggest success stories and innovation can happen.”

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