Australia’s buy now pay later (BNPL) industry is experiencing significant deceleration after years of rapid expansion. Annual spending growth through BNPL platforms declined to $1.5 billion in 2025 from the $3 billion yearly growth seen in the late 2010s. Credit applications through BNPL services fell 35% in the first half of 2026 compared to the prior year. Despite positioning itself as a potential credit card replacement, BNPL accounts for substantially less spending than traditional credit cards, with Australians using credit cards 20 times more than BNPL services in 2025.
Regulatory reforms implemented in 2025 contributed significantly to the slowdown by classifying BNPL as a form of credit. These changes required companies to conduct credit checks and report new accounts to credit agencies, eliminating the instant approval process that previously distinguished BNPL from traditional lending. The increased friction in obtaining BNPL services prompted consumers to explore alternative forms of credit such as personal loans and credit cards. At least eight BNPL platforms have exited the Australian market since 2022, leaving four major operators: PayPal, Klarna, and Zip each with approximately 2 million customers, and Afterpay with 4.5 million customers. PayPal’s service has stalled since 2023, while Zip experienced a 7% annual decline in users.
To counteract slowing growth, BNPL providers are expanding merchant networks and diversifying product offerings. Afterpay added major retailers including Uber and Amazon in 2025 and reports increasing usage in petrol, convenience, and grocery categories. The company is also developing offerings in insurance, travel, and telecommunications. BNPL platforms charge merchants approximately 3% of transaction value compared to 1% for credit cards, creating revenue pressures as businesses reassess adoption. Afterpay generated $625 million in merchant fees domestically in 2025 but recorded a $741 million pre-tax loss in Australia.
Industry analysts offer divergent outlooks on the sector’s future. Some believe BNPL will stabilize at slower growth rates as consumers continue seeking payment flexibility for essential expenses. Others suggest the remaining operators will abandon the fee-free model that defined the sector, introducing charges or premium products to sustain revenue from a stagnating customer base. Afterpay’s subscription product “Afterpay Plus” saw revenue surge from $22.8 million to $42.5 million between 2024 and 2025, demonstrating potential revenue diversification strategies.
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