How BNPL is changing e-commerce

While the concept of financing large purchases isn’t new — think big-ticket items like cars and kitchen appliances — the ability to buy virtually anything online and spread the cost over multiple payments is quickly becoming the go-to method for many shoppers.

Flexible finance’s positive impact on e-commerce growth

BNPL bypasses traditional financing problems like access, complexity, interest, and high fees. Customers can click, buy, and find out if they are approved for BNPL within seconds at checkout, all from their laptops or smartphones.

This flexibility has led to customers opting for BNPL. And it’s driving growth for businesses, too — increasing conversion rates by encouraging shoppers to buy, or buy higher-value items.

Increased customer spending and conversion rates

Have you ever put off buying a premium item because of the price tag? BNPL helps remove that hurdle. In fact, according to one study by PYMNTS, four in ten BNPL users are likely to cancel or delay a purchase, or opt for a cheaper product, if BNPL isn’t available.³

Customers can sign up for BNPL on the spot when they go to pay. They don’t need to satisfy a specific credit score requirement (although some providers will run a soft check so they can understand the applicant’s credit history). And they can often avoid interest when payments are made on time and in full.

For retailers, this could lead to a significant uptick in sales. The average order value (AOV) for small and midsized businesses using PayPal Pay Later — PayPal’s BNPL offering — is 20% higher than standard AOVs.⁴

Expanded market reach and customer base

BNPL can help businesses engage more with customers who have limited credit access or a preference for deferred payments. In a report, Bank of America concluded that nearly half of all households that used BNPL in March 2024 came from households earning less than $50,000 annually.⁵ The second-largest group earned between $50,000 and $125,000.⁵

BNPL is also attracting different generations, with 9% of PayPal Pay Later respondents classed as Gen Z, and Millennials making up 43%.⁶ Adding BNPL at checkout could help businesses reach new customers online and take advantage of growth in Gen Z e-commerce.

Leveraging the benefits of BNPL for online retailers

Retailers want to get paid immediately, and customers want to pay for their purchases over time. BNPL satisfies both preferences.

BNPL’s benefits are numerous, including increased customer spending, access to new and wider target markets, and higher conversion rates. And while credit cards remain the dominant payment method for now, they’re expected to lose their leading position by 2027 as digital wallets reach a market share of 50%.⁷

Find out more about PayPal Pay Later and how it can benefit your business today.