Buy Now Pay Later: Risks, Regulation & Responsible Use

The BNPL Boom in Australia¶

Buy Now Pay Later services have fundamentally reshaped how Australians pay for goods and services. From a niche fintech offering in 2016, the sector has grown to capture an estimated $22 billion in annual transaction volume across Australia, with approximately 7 million active accounts as of late 2025. Major providers including Afterpay (now part of Block), Zip, Humm, and international entrants like Klarna compete fiercely for market share.

The appeal is straightforward: consumers can split purchases into four interest-free instalments with no upfront cost, provided payments are made on time. For merchants, BNPL drives higher conversion rates and larger basket sizes, despite merchant fees of 3–6% — significantly above credit card interchange costs.

However, the rapid growth has brought legitimate concerns about consumer harm, debt accumulation, and regulatory gaps that Australian lawmakers have now moved decisively to address.

The New Regulatory Framework¶

In mid-2025, the Australian Government passed legislation bringing BNPL products under the National Consumer Credit Protection Act, effective from 1 July 2026. This represents the most significant reform to the sector since its inception and aligns Australia with similar moves in the UK and EU.

Key Regulatory Changes¶

• Affordability assessments: BNPL providers must now conduct proportionate affordability checks before extending credit, similar to the responsible lending obligations that apply to credit cards and personal loans.
• AFSL licensing: All BNPL providers must hold an Australian Financial Services Licence, subjecting them to ASIC's supervisory and enforcement powers.
• Hardship obligations: Providers must offer genuine hardship arrangements for customers experiencing financial difficulty, including pausing repayments and waiving fees.
• External dispute resolution: BNPL complaints can now be escalated to the Australian Financial Complaints Authority (AFCA), giving consumers an independent avenue for resolution.
• Fee caps: Late fees are capped at the lesser of $10 per missed payment or 25% of the original purchase value, preventing fee spiralling on small transactions.

ASIC has signalled it will take a phased enforcement approach, with a 12-month transition period during which providers must demonstrate compliance readiness.

Credit Scoring Impacts¶

One of the least understood aspects of BNPL usage is its interaction with credit reporting. Under Comprehensive Credit Reporting (CCR), BNPL accounts are now reported to the major credit bureaus — Equifax, Illion, and Experian — including account opening dates, credit limits, and repayment history.

This means that missed BNPL payments now directly affect your credit score, potentially impacting your ability to secure a home loan, car loan, or credit card in the future. Multiple concurrent BNPL accounts can also signal to lenders that a borrower is relying on short-term credit to manage cash flow, which may reduce borrowing capacity assessments.

At Apex Bank, our credit assessment process takes a holistic view of a customer's financial position. We advise home loan applicants to disclose all BNPL commitments and, where possible, close unused BNPL accounts at least three months before applying for a mortgage.

BNPL vs Credit Cards: A Comparison¶

Neither product is inherently better — the right choice depends on the consumer's spending discipline, repayment habits, and financial goals. A credit card with the balance paid in full each month offers superior consumer protections and potential rewards, while BNPL can be suitable for budgeting smaller purchases into predictable instalments.

Tips for Responsible BNPL Use¶

For customers who choose to use BNPL alongside their Apex Bank accounts, we recommend the following practices:

1. Treat it as debt: Even though BNPL is marketed as "interest-free," it is a credit obligation. Factor all instalments into your monthly budget.
2. Limit active accounts: Maintain no more than one BNPL account and avoid using multiple providers simultaneously.
3. Set calendar reminders: Missed payments incur fees and damage your credit score. Automate payments where possible.
4. Avoid using BNPL for essentials: If you are using BNPL for groceries or utility bills, this may indicate underlying financial stress — consider speaking with a financial counsellor.
5. Check your credit report: Request a free annual credit report to ensure BNPL accounts are being reported accurately.
6. Close unused accounts: Dormant BNPL accounts still appear on your credit file and may affect borrowing capacity.

Looking Ahead¶

The regulatory reforms signal a maturing of the BNPL sector. Consumers can expect improved protections, but also greater scrutiny of their BNPL usage when applying for traditional credit products. Apex Bank supports the reforms as a step toward a fairer and more transparent consumer credit market.

This article is general information only and does not constitute financial advice. If you are experiencing financial hardship, contact the National Debt Helpline on 1800 007 007.