Key facts
- Australian Buy Now, Pay Later (BNPL) spending growth has decelerated significantly.
- At least eight BNPL platforms have exited the Australian market since 2022.
- New BNPL account applications fell 35% year-on-year in the three months to June 2026.
- Regulatory reforms in 2025 introduced credit checks and friction, impacting instant approvals.
- Afterpay reported a $741 million pre-tax loss in Australia despite expanding merchant partnerships and introducing new fee-based products.
Australia's Buy Now, Pay Later (BNPL) sector, once a rapidly expanding market, is showing signs of a significant slowdown, prompting questions about the sustainability of its boom. Afterpay, a dominant player, recently secured naming rights for a Sydney arena, aiming to integrate BNPL services for event-related purchases. However, this move comes as the sector faces headwinds from slowing growth, increased competition, and regulatory changes.
According to the Reserve Bank of Australia, yearly spending growth through BNPL platforms has halved from $3 billion in the late 2010s to $1.5 billion in 2025. Furthermore, Australians continue to spend significantly more on credit cards, with $22 billion spent last year compared to $22 billion via BNPL. The market has seen at least eight BNPL platforms withdraw since 2022, leaving four major operators: PayPal, Klarna, Zip, and Afterpay. While Afterpay and Klarna report growth, PayPal's Pay-in-4 service has stagnated, and Zip has experienced a 7% year-on-year decline in users, leading to its exit from the New Zealand market.
Experts attribute the slowdown partly to reforms enacted in 2025, which classified BNPL as credit. This necessitates credit checks and reporting to agencies, adding friction to the previously instant approval process. Kevin James, an analyst at Equifax, noted that this regulatory shift has deterred some consumers who previously found BNPL easy to access. Younger shoppers, who were early adopters, are now facing late payment fees, with Afterpay reporting 2.9% of customers being three months late on repayments in June 2025, compared to 2.1% for credit cards. Afterpay generated $123 million annually in late fees in 2024 and 2025.
In response to slowing uptake, BNPL companies are expanding merchant acceptance and encouraging spending on a wider range of products, including essentials like groceries and petrol. Businesses pay BNPL platforms an average fee of 3% per transaction, higher than credit card fees. Afterpay's Australian revenue from merchant fees reached $625 million in 2025, though the company, owned by Block, recorded a $741 million pre-tax loss in Australia. Afterpay plans to expand into insurance, travel, and telecommunications.
However, challenges remain. Professor Angel Zhong of RMIT suggests it will become harder for platforms to onboard new businesses, especially with the Reserve Bank's ban on card surcharging potentially making card transactions more attractive. Michael Ebstein of MWE Consulting believes the industry can survive at a slower pace, catering to consumer demand for spreading payments. Conversely, Grant Halverson of McLean Roche describes the sector as "dying slowly," predicting that remaining operators may need to introduce fees or new revenue models. Zip and Afterpay already offer fee-based products like 'Afterpay Plus,' which saw significant revenue growth. Afterpay's co-founder, Anthony Eisen, maintains the platform is growing rapidly and customers are using it more frequently. Zhong views the arena naming deal as a sign of BNPL's maturation into a regulated industry, which often leads to saturation and difficulty attracting new customers.