Is Australia’s Buy Now, Pay Later Boom Finally Over?
Australia’s once-meteoric buy now, pay later sector is confronting a sharp deceleration in consumer spending, stricter federal regulations, and rising delinquency rates, according to data from the Reserve Bank of Australia and credit reporting agency Equifax. Once heralded as a disruptive alternative to traditional credit cards, the market is navigating significant consolidation as major operators pull back and transaction growth slows across the board.
The structural shift in the Australian BNPL ecosystem creates immediate operational hurdles for retail merchants and e-commerce platforms. As checkout financing undergoes strict regulatory oversight, companies must adapt to changing consumer borrowing behaviors or risk cart abandonment.
Slowing Growth and Changing Consumer Spending Patterns
Australians’ yearly spending through buy now, pay later platforms grew by $3bn annually during the late 2010s, but that expansion cooled to just growth of $1.5bn in 2025, according to Reserve Bank figures. While the payment method initially positioned itself as a permanent replacement for traditional plastic, Australians spent 20 times more via credit cards last year than through BNPL ($22bn). Market contraction has hit smaller players hardest. At least eight BNPL platforms have exited the Australian market since 2022. National Australia Bank withdrew its proprietary product earlier this year, leaving four major operators: PayPal, Klarna, Zip, and Afterpay. Customer metrics highlight the divergence. PayPal’s Pay-in-4 service has seen no customer growth since 2023, and Zip reported a 7% year-on-year drop in active users, prompting the firm to exit the New Zealand market.
Conversely, Afterpay and Klarna maintain that they are expanding their footprint. Afterpay, owned by the US-based enterprise Block, recently acquired the naming rights to a Sydney Olympic Park arena, renaming it Afterpay Arena. The venue aims to allow Australians to purchase event tickets, merchandise, and food on deferred payment terms. Despite these high-profile marketing plays, Afterpay has historically never turned a profit in Australia, recording a $741m pre-tax loss locally while slashing internal valuations of its domestic business.
Regulatory Friction and Credit Bureau Reporting
Federal lending reforms implemented in 2025 fundamentally altered the operational mechanics of the sector. The laws formally classified BNPL products as regulated credit, forcing operators to execute formal credit checks and report new accounts to credit bureaus. Equifax reported that new BNPL account applications plummeted 35% in the three months to June 2026 compared to the previous year. Kevin James, an analyst at Equifax, noted that the regulations effectively eliminated the frictionless, instant approvals that drove the sector’s initial adoption.
Consumers facing friction on BNPL platforms have increasingly migrated toward conventional credit cards and personal loans. Afterpay reported that 2.9% of its customers were three months late on repayments in June 2025, outpacing the 2.1% delinquency rate recorded for standard credit cards. The company collected $123m in late fee revenue annually across 2024 and 2025, according to its financial accounts, underscoring the reliance on penalty structures even as default rates climb.
Merchant Fees and Expansion into Essential Goods
Faced with slowing user acquisition, remaining operators are aggressively expanding merchant acceptance networks to capture everyday spending. Businesses typically pay platforms a merchant fee of roughly 3% per transaction, compared to roughly 1% for credit cards and a fraction of a percent for debit cards. Merchant fees generated the vast majority of Afterpay’s local revenue, reaching $625m in 2025.
Mike Ryan, Afterpay’s Asia-Pacific vice-president, stated that the company is integrating with a broader range of everyday retailers to cement its status as a primary payment method. Afterpay secured partnerships with Uber and Amazon in Australia in 2025, bringing its total adopting businesses to roughly 290,000. Ryan pointed to significant spending growth in petrol, convenience shopping, and grocery purchases as critical volume drivers for the platform’s future quarters.
As the sector matures under tighter statutory supervision, corporate treasurers and digital retail executives must carefully evaluate their payment infrastructure investments.