Is Australia’s Buy Now Pay Later boom at an end?

Several firms promised to disrupt the consumer credit market by offering consumers their purchases instantly and the bill later. Did it work? Get our breaking news email, free app or daily news podcast Afterpay has never turned a profit in Australia. Last month, it spent millions to take over a Sydney Olympic Park arena. And while BNPL arrived promising to one day replace credit cards, Australians spent 20 times more via credit cards last year than through BNPL ($22bn). At least eight BNPL platforms have left Australia since 2022, including the Australia-bank" class="entity-link entity-organization" data-entity-id="120177" data-entity-type="organization">National Australia Bank withdrawing its product earlier this year, leaving four major operators: PayPal, Klarna and Zip (each with about 2 million customers) and Afterpay, with 4.5 million. Afterpay and Klarna report they are growing, while PayPal’s Pay-in-4 service customer have not grown since 2023 and Zip has seen a 7% year-on-year fall in users. Zip will leave the New Zealand market on Monday. Credit agency Equifax has found new BNPL account applications in the three months to June 2026 were down 35% from the previous year. Experts attribute the slowdown in part to 2025 laws that aimed to stop companies approving customers for funds they couldn’t afford to repay. The reforms defined BNPL as a form of credit, forcing companies to perform credit checks and report new accounts to credit agencies, potentially affecting future activities like mortgage applications. Kevin James, analyst at Equifax, says the reforms have stopped platforms from offering instant approvals, detracting from their unique appeal. Some customers have turned to other forms of lending like credit cards and personal loans, he says. “If I wanted to go for a BNPL product in 2022, I would have found it relatively easy,” James says. “Once it became more regulated and had more friction, then I think people changed.” Before the reforms, younger shoppers had piled into BNPL’s promise of getting goods and services immediately and spreading out the interest-free payments over time. Users were instead lumped with late payment fees, or cut off from platforms, if they failed to repay. Afterpay has reported 2.9% of customers were three months late on repayments in June 2025, compared with 2.1% for credit cards. Contacted for comment, the company said 2% of purchases in the last three months 2025 attracted late fees. The company earned $123m in late fee revenue annually in 2024 and 2025, according to its Australian accounts. With uptake slowing, companies have been working to expand the range of outlets that accept BNPL and to encourage existing customers to spend heavily on more types of products. Businesses pay the platforms a fee of 3% of a transaction’s value when customers use BNPL, on average. In comparison, credit card fees are 1% and debit card fees a fraction of that. In exchange, those businesses hope BNPL users will spend more. Fees from merchants make up the majority of Afterpay’s local revenue, at $625m in 2025. The company, owned by the US-based business Block, recorded a $741m pre-tax loss in Australia as it has repeatedly slashed estimates of the value of its local business. Afterpay’s Asia-Pacific vice-president, Mike Ryan, says the company is giving users a greater range of businesses at which to use its services so it can become their first choice of payment method. Afterpay had been adopted by 290,000 Australian businesses by 2024, adding Uber and Amazon in Australia in 2025. He says Afterpay is seeing “significant wins” in spending on petrol, convenience and groceries and plans to expand into insurance, travel and telecommunication. The company declined to share supporting data, but advocates have long warned the rising cost of living has pushed customers to BNPL for essentials. “Merchants would likely stay away, unless they can see that while using BNPL, they can attract a strong customer base,” Zhong says. Michael Ebstein, from MWE Consulting, says the industry can survive at a slower pace as consumers will still want to spread out their spending. “I think there’ll still be attractive growth for the next couple of years, but that’s all,” Ebstein says. But Grant Halverson, from McLean Roche, says the sector has been “dying slowly”. Halverson believes the remaining operators will have to abandon the fee-free, interest-free model that made BNPL’s name, by adding fees or introducing new products to raise revenue from a stagnating base of users. Zip, for example, charges monthly fees and interest on some products unless customers meet certain conditions. The trade-off is that Zip cards can be used anywhere. Afterpay offers a similar product, “Afterpay Plus”, which charges users $9.99 a month to pay in instalments anywhere that accepts mobile phone payments. Its accounts show revenue from the product’s fees surged from $22.8m in 2024 to $42.5m in 2025. Afterpay’s co-founder, Anthony Eisen, says the entire platform is still growing rapidly and its customers are using it more frequently. “If you’re a product that doesn’t deliver what customers want, obviously things stagnate,” Eisen says, speaking at the Arena launch in late July. Zhong says the arena’s renaming, replacing a traditional bank, shows that BNPL has become part of the establishment. “It is now becoming a more mature and regulated industry … [and] once you reach that saturation, it’s really hard to attract new customers,” Zhong says.