Australia’s buy now, pay later sector is seeing a slowdown after years of rapid growth. Afterpay, one of the most recognizable names in the space, has never turned a profit in Australia. The company changed its branding by taking over naming rights from Qudos Bank, signaling a shift in how the sector operates. While Afterpay and Klarna continue to report growth, PayPal’s Pay-in-4 service has seen no increase in users since 2023. Zip, another major platform, has experienced a 7% year-on-year fall in users compared to the previous year. Experts say this decline is partly due to new laws introduced in 2025 aimed at preventing companies from approving customers for loans they cannot repay.
Kevin James, an analyst at Equifax, explained that these reforms have stopped platforms from offering instant credit approvals. He noted that in 2022, it was easy to get approved for a BNPL product, but now the process is more strict. Businesses pay BNPL platforms about 3% of a transaction’s value when customers use the service, which is higher than credit card fees. Fees from merchants made up $625 million in revenue for Afterpay in 2025.
The company has seen strong performance in spending on items like petrol, groceries, and convenience goods. Afterpay is planning to expand into new areas such as insurance, travel, and telecommunications. Professor Angel Zhong from RMIT said it will become harder for platforms to attract new businesses. Zip, for example, charges monthly fees and interest unless customers meet certain conditions. However, Zip cards can be used anywhere that accepts mobile payments.
The sector’s growth is being affected by broader economic conditions, including rising interest rates and changes in consumer behavior, according to Reuters. Retailers like Woolworths have reported that higher prices and rate increases are pushing consumers to stick to budgets rather than make larger purchases. Banks, which also face challenges from changing consumer needs, are now competing more intensely for customers. Some companies have seen sales rise but are struggling to turn that into profit, especially as demand softens. The broader economic environment has made it more difficult for businesses to grow profits, even when sales increase.
In Australia, the BNPL sector was once seen as a fast-growing alternative to traditional credit cards and loans, according to a report from Investopedia. The most popular apps include Affirm, Klarna, PayPal Pay in 4, and Cash App Afterpay. Affirm is rated as the best buy now, pay later app due to its lack of fees and strong performance in other areas. It offers payment plans such as Pay in 2, Pay in 30, and Pay in 4. Payments are made from a bank account, and autopay is optional.
Klarna is known for its wide merchant network, accepting over one million merchants. It does not have a fixed spending limit and offers multiple ways to split payments. PayPal Pay in 4 is accepted by 30 million merchants and supports purchases between $30 and $1,500 (US figures). Each platform has its own approach to fees, repayment options, and how they report to credit bureaus.
Despite the challenges, some platforms continue to grow, though at a slower pace than before, The Guardian reported. The sector’s future depends on how well these companies adapt to new rules and shifting consumer habits.