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

Afterpay’s Arena Bet Signals a New Chapter for Australia’s BNPL Sector

Wanderstayfinder.com – Afterpay has never turned a profit in Australia. Last month, it spent millions to take over a Sydney Olympic Park arena. The company says Afterpay Arena will be the first venue where Australians can “buy now, pay later” for their event tickets, merchandise, dinner and even alcohol. The deal to take the naming rights from a traditional lender, Qudos Bank, is the latest evolution for a sector which has rapidly expanded over the past decade. But as growth slows and players leave the market, is the Buy Now Pay Later boom over?

Growth Deceleration and Market Consolidation

Australians’ yearly spending through buy now pay later (BNPL) platforms grew $3bn a year in the late 2010s but slowed to growth of $1.5bn in 2025, according to the Reserve Bank. 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 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.

Regulatory Reforms Reshape Consumer Experience

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.

“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.”

Some customers have turned to other forms of lending like credit cards and personal loans, he says. 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.

Late Payment Trends and Revenue Streams

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.

Financial Performance and Strategic Expansion

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. Angel Zhong, a professor of finance at RMIT, says it will soon be harder for platforms to sign up new businesses. The Reserve Bank’s ban on card surcharging is set to make card transactions even cheaper, meaning businesses could find higher BNPL fees less palatable.

“Merchants would likely stay away, unless they can see that while using BNPL, they

The competitive landscape continues to evolve as platforms adapt to both regulatory pressures and changing consumer habits. While BNPL’s rapid expansion phase appears to be cooling, the sector’s long-term viability will depend on whether companies can demonstrate sustainable growth beyond their initial customer acquisition surge. The arena deal represents Afterpay’s confidence in maintaining relevance despite headwinds, positioning the brand as more than just a payment tool but as an integral part of the Australian consumer experience across multiple verticals.