The buy now, pay later (BNPL) boom in Australia has been a fascinating phenomenon, but is it on the decline? Afterpay, a key player in this sector, has taken an interesting step by acquiring naming rights for an arena, signaling a shift in strategy.
The BNPL Landscape
BNPL platforms have seen a slowdown in growth, with yearly spending through these platforms increasing by $3 billion in the late 2010s, but only by $1.5 billion in 2025, according to the Reserve Bank. This is a significant drop-off, and it raises questions about the future of this payment method.
What many people don't realize is that BNPL was initially positioned as a potential replacement for credit cards. However, Australians spent a staggering 20 times more via credit cards last year compared to BNPL. This gap highlights the challenges BNPL faces in gaining widespread adoption.
Regulatory Reforms and Their Impact
The slowdown in BNPL growth can be partly attributed to regulatory reforms implemented in 2025. These reforms aimed to prevent companies from approving customers for funds they couldn't afford to repay. As a result, BNPL platforms now have to perform credit checks and report new accounts to credit agencies, which has likely deterred some potential users.
Personally, I think this is a crucial development. While BNPL offered an attractive, interest-free model, it also carried risks, especially for younger shoppers who might not fully understand the implications of late payments. The reforms have added a layer of protection, but they've also made the process more cumbersome, which could be a turn-off for some consumers.
The Future of BNPL
With uptake slowing, companies are now focusing on expanding the range of outlets that accept BNPL and encouraging existing customers to spend more. This strategy aims to increase revenue and market share. However, there are challenges ahead.
One thing that immediately stands out is the fee structure. Businesses pay an average of 3% of a transaction's value when customers use BNPL, compared to 1% for credit cards and a fraction of that for debit cards. This could be a significant barrier, especially as the Reserve Bank's ban on card surcharging makes traditional card transactions even more cost-effective for businesses.
Professor Angel Zhong from RMIT University highlights this concern, suggesting that it will become harder for platforms to sign up new businesses unless they can demonstrate a strong customer base. This is a critical point, as it indicates that the growth of BNPL might be limited by its own cost structure.
Industry Perspectives
There are varying opinions within the industry about the future of BNPL. Michael Ebstein from MWE Consulting believes the industry can survive at a slower pace, as consumers will still want the flexibility of spreading out their spending. On the other hand, Grant Halverson from McLean Roche describes the sector as "dying slowly," suggesting that the remaining operators will need to adapt their models to survive.
Afterpay's co-founder, Anthony Eisen, remains optimistic, stating that their platform is still growing rapidly and that customers are using it more frequently. This optimism is intriguing, especially considering the challenges faced by the industry as a whole.
A Broader Perspective
The renaming of the arena to Afterpay Arena is a symbolic move, indicating that BNPL has become more established and regulated. This shift could be a double-edged sword. While it signifies maturity, it also suggests that the industry might be reaching a saturation point, making it harder to attract new customers.
In my opinion, the future of BNPL in Australia will depend on its ability to innovate and adapt. The industry needs to find a balance between offering attractive payment terms and ensuring financial responsibility. It will be interesting to see if BNPL can evolve to meet these challenges and continue to gain traction in the market.
