AI and Buy Now, Pay Later Transform Holiday Shopping for Merchants

As the holiday season approaches, small business owners need to harness new tools and methods to capture consumer attention and maximize sales. According to PayPal’s recent 2025 Holiday Shopping Survey, shoppers are increasingly turning to artificial intelligence (AI) and flexible payment options like Buy Now, Pay Later (BNPL) to enhance their shopping experiences. The findings present both opportunities and challenges for small businesses aiming to thrive this holiday season.

PayPal’s survey reveals that 40% of American consumers have utilized AI for shopping within the past year, with 77% intending to use AI tools again this holiday season. This trend has significant implications for merchants who want to optimize their visibility across AI platforms. “Shoppers are moving fluidly across channels, discovering products through AI, returning to stores, and choosing flexible payment options like Buy Now, Pay Later (BNPL) to maximize this holiday season,” stated Michelle Gill, General Manager of Small Business and Financial Services at PayPal.

Small business owners can capitalize on this momentum by ensuring their products are optimally presented across AI-driven platforms. In doing so, they can connect with consumers who are increasingly seeking guidance on deals and gift ideas. Notably, 34% of respondents plan to use AI to find the best deals, while 30% will rely on it for product comparisons, making visibility critical for success.

Equally important is the increasing prevalence of BNPL options, which have shifted from being a novelty to a mainstream expectation among consumers. Half of those surveyed intend to use BNPL over the holiday season, citing affordability and budget control as their primary motivations. This payment method can be particularly potent; the survey found that 52% of consumers are more likely to make a purchase when BNPL is available. Gill emphasized the advantages of offering BNPL, stating, “When shoppers know they can pay over time, they’re more likely to complete their purchase,” adding that PayPal data indicates a significant increase in average order value—91% for enterprises and 62% for small businesses.

While embracing these tools offers considerable benefits, small business owners should consider the practical applications and challenges that come with them. To effectively implement AI, businesses must invest time and resources into optimizing their online presence. This includes product listings that resonate with AI algorithms, ensuring digital channels are well-maintained and easy to navigate.

Moreover, adopting BNPL options comes with its own set of considerations. Integrating this payment method might necessitate a partnership with a financial service provider, thus creating a potential barrier for smaller businesses with limited budgets. Ensuring that this payment choice is visible throughout the customer journey can also require thoughtful marketing strategies.

Another notable trend from the survey is the revival of omnichannel retailing. About 64% of shoppers plan to shop in physical stores this holiday season, highlighting the importance of a multi-channel strategy. Businesses must ensure a seamless shopping experience across online and in-store platforms, which can enhance customer loyalty and sales. The survey results show that 74% of consumers are more inclined to shop with merchants offering cash back or rewards, making rewards programs an essential aspect of customer attraction.

As the holiday season approaches, small business owners will need to adapt rapidly to these evolving consumer behaviors. Those who can unify their online and physical experiences, while also delivering meaningful rewards, are likely to foster deeper customer connections. This strategy serves not just for the holiday rush, but for long-term growth as well.

In light of these findings, leveraging AI and offering BNPL could be key differentiators for small businesses. By embracing technology and the evolving retail landscape, even the smallest of businesses can compete effectively during this bustling season. For more information on this survey and its implications, you can visit the original release from PayPal at PayPal Newsroom.

This article, "AI and Buy Now, Pay Later Transform Holiday Shopping for Merchants" was first published on Small Business Trends