Australia’s BNPL Report Buy Now, Pay Later (BNPL) Market 2025 Outlook and Growth Projections
The Buy Now, Pay Later (BNPL) industry in Australia is undergoing rapid transformation, fueled by strong consumer demand, evolving regulatory frameworks, and intense competition among both domestic and global players. According to the latest “Australia Buy Now Pay Later Business and Investment Opportunities Databook – 75+ KPIs on BNPL Market Size, End-Use Sectors, Market Share, Product Analysis, Business Model, Demographics – Q1 2025 Update,” the BNPL payment market in Australia is forecast to grow by 12.1% annually, reaching a valuation of USD 14.52 billion in 2025.
Between 2021 and 2024, the Australian BNPL sector demonstrated remarkable growth, achieving a Compound Annual Growth Rate (CAGR) of 19.8%. Although this pace is expected to moderate slightly, the market will continue expanding at a projected CAGR of 8.5% from 2025 to 2030. By 2030, the BNPL industry is anticipated to reach a total value of approximately USD 21.87 billion, up from USD 12.95 billion in 2024. This sustained growth highlights the increasing consumer preference for BNPL services as a viable alternative to traditional credit options.
Market Expansion and Consumer Behavior Trends
The widespread adoption of BNPL services in Australia is driven by shifting consumer spending habits, with millennials and Gen Z leading the trend. The flexibility and convenience of installment-based payments have made BNPL a preferred choice for retail purchases, particularly in categories such as fashion, electronics, and home furnishings. The sector has also seen significant expansion into non-traditional segments, including automotive services, healthcare, and travel.
One of the key drivers behind this growth is strategic partnerships between BNPL providers and major retailers. Companies such as Afterpay, Zip, and Humm have forged alliances with top-tier brands like Myer, JB Hi-Fi, and IKEA, offering seamless integration of BNPL solutions at checkout. These collaborations not only enhance consumer accessibility to interest-free credit but also boost sales conversions for retailers.
Competitive Landscape and Market Players
The Australian BNPL market remains highly competitive, with leading players such as Afterpay, Zip Co, and Humm dominating the space. However, global entrants like Klarna and PayPal have also established a strong presence, intensifying market competition. Below is a closer look at some of the key industry players and their strategic initiatives:
1. Afterpay:
- A pioneer in the Australian BNPL space, Afterpay continues to lead the market through innovation.
- The company has introduced self-regulated spending caps to promote responsible borrowing.
- Its strategic partnerships with major retailers like IKEA have expanded its reach, particularly among younger consumers.
2. Zip Co:
- Zip Co has been actively expanding its footprint through acquisitions and global partnerships.
- The company focuses on diverse product offerings, including Zip Pay and Zip Money, catering to different spending needs.
- Despite the terminated merger with Sezzle, Zip continues to optimize its market position through asset optimization strategies.
3. Klarna:
- The Swedish fintech giant has grown rapidly in Australia by leveraging its global reputation and innovative product offerings.
- Commonwealth Bank of Australia (CBA) holds a stake in Klarna, though there have been discussions about selling down its investment as Klarna prepares for a potential U.S. IPO.
4. Humm:
- Humm has made inroads into high-value purchase categories such as automotive services, home improvements, and healthcare.
- Strategic collaborations with companies like Lander Toyota and Reece Plumbing highlight its expansion beyond traditional retail.
Regulatory Developments and Consumer Protection
Australia’s BNPL sector has attracted regulatory scrutiny due to concerns about consumer debt accumulation. To ensure responsible lending practices, the Australian Securities and Investments Commission (ASIC) has mandated that BNPL providers apply for credit licenses under new laws.
The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 is a pivotal step in tightening industry regulations. This legislation places BNPL services under the National Consumer Credit Protection Act 2009, requiring providers to:
- Obtain an Australian credit license.
- Conduct stricter credit assessments.
- Ensure transparent fee structures and repayment terms.
These regulatory changes aim to strike a balance between fostering innovation and protecting consumers from financial distress. BNPL firms that prioritize compliance and consumer well-being are expected to gain a competitive advantage in the evolving market landscape.
Expanding BNPL Services into New Retail Sectors
Beyond traditional retail, BNPL services are making inroads into new sectors, further diversifying their applications:
1. Automotive Services:
- BNPL companies are partnering with auto service providers to offer installment-based payments for vehicle repairs and maintenance.
- Humm’s collaboration with Lander Toyota exemplifies this trend, allowing customers to manage auto expenses more flexibly.
2. Home Furnishings and Renovations:
- The demand for home improvement financing has surged, leading to BNPL partnerships with companies like Beacon Lighting and Reece Plumbing.
- Afterpay’s collaboration with IKEA has enabled consumers to furnish their homes affordably while paying in installments.
3. Healthcare and Education:
- BNPL solutions are increasingly being integrated into healthcare services, offering patients the ability to finance medical treatments.
- Education providers are also exploring BNPL models to assist students in managing tuition fees without resorting to traditional student loans.
Strategic Retail Partnerships Fueling Growth
Retailers are actively leveraging BNPL services to attract younger demographics and drive higher sales. Strategic alliances between BNPL firms and major retail chains have proven mutually beneficial, as seen in partnerships such as:
- Afterpay x IKEA: Aimed at enhancing affordability for home furnishing shoppers.
- Zip Co x Myer: Encouraging flexible spending options for fashion and lifestyle products.
- Humm x Automotive Retailers: Expanding BNPL usage for high-ticket vehicle servicing and repairs.
As BNPL becomes a staple payment method in both online and brick-and-mortar stores, retailers are expected to further embed BNPL solutions into their checkout systems, making installment payments a default option for consumers.
Market Consolidation and Emerging Trends
The Australian BNPL landscape is poised for further consolidation, with leading players seeking economies of scale to maintain competitiveness. Zip Co’s acquisition of Sezzle, though ultimately unsuccessful, signals the industry’s drive toward mergers and acquisitions to strengthen market positions. Additionally, traditional financial institutions such as Commonwealth Bank and global fintech firms are introducing their own BNPL products, adding another layer of competition.
Looking ahead, the following trends are expected to shape the industry:
- Greater focus on responsible lending: Companies will introduce features such as spending caps and pre-purchase credit assessments to promote financial sustainability.
- Technological advancements: AI-driven risk assessment models and personalized BNPL offerings will enhance user experiences.
- Expansion into subscription-based services: BNPL may soon extend to streaming services, fitness memberships, and other recurring payment models.
The Future of BNPL in Australia
As Australia’s BNPL industry continues its upward trajectory, it remains a key driver of innovation in the financial services sector. While the market will see increased regulatory scrutiny, responsible lending practices will enhance consumer trust and market stability. With BNPL services expanding across diverse industries, their role in reshaping Australia’s payment ecosystem is undeniable.
In the coming years, competition will intensify as new players enter the market and traditional financial institutions introduce their own installment-based solutions. The firms that prioritize compliance, responsible lending, and seamless integration with retail partners will be best positioned to thrive in this evolving landscape.
Overall, the Australian BNPL sector is set to remain a dominant force in the payment industry, offering consumers greater financial flexibility while driving economic activity across multiple industries.
