Afterpay and PayPal serve fundamentally different roles in the payment ecosystem. Afterpay is a buy now, pay later (BNPL) service that splits purchases into four interest-free installments. PayPal is a traditional payment processor and digital wallet. Comparing them isn't about choosing one over the other — it's about understanding when each makes financial sense for your business.
Fee Comparison
Afterpay charges merchants 4-6% + $0.30 per transaction (typically around 6% + $0.30). PayPal charges 2.99% + $0.49 for standard online business payments. On a $100 purchase, Afterpay takes roughly $6.30 vs PayPal's $3.48. Afterpay costs nearly twice as much per transaction. The question is whether Afterpay's benefits justify the premium.
The AOV Argument
Afterpay's primary selling point for merchants is increased average order value (AOV). Studies show BNPL options increase AOV by 20-40% and can improve conversion rates. A $100 product feels more affordable as "$25 every two weeks." If Afterpay increases your AOV from $80 to $110, the extra revenue from larger orders can more than offset the higher processing fees — even at 6%.
Customer Demographics
Afterpay skews toward younger shoppers (18-34) who may not have credit cards or prefer not to use them. PayPal appeals to a broader demographic and is particularly trusted by online shoppers who want to avoid entering card details on unfamiliar sites. Offering both captures different customer segments — Afterpay for installment-seeking younger buyers and PayPal for trust-conscious older buyers.
When Afterpay Makes Sense
Afterpay is worth the higher fees if you sell discretionary, mid-range products ($50-$500) where impulse purchases and larger basket sizes are possible. Fashion, beauty, electronics, and home goods see the biggest BNPL uplift. For low-margin products, essential goods, or B2B transactions, the 6% fee eats too deeply into margins. PayPal should be your baseline payment option regardless — it's cheaper and universally trusted. Add Afterpay as a supplementary option if your product category and customer demographics align.