I think we’re all familiar with the buy now, pay later model. Allowing consumers to purchase items immediately and spread out the overall cost over time in incremental payments. It’s a trap that consumers can fall in, so it’s important to understand the full model.
Key Points
What is Buy Now Pay Later (BNPL)
Why has BNPL expanded in recent years
How is BNPL being used today
Why Consumers Love BNPL
Interest-Free (If You’re On Time)
Fast, Easy, and Convenient
Better budgeting control through instalments
The Dark Side of Deferred Payment
Late fees add up quickly
Encouraging overspending and debt
Credit scores at risk
BNPL Outlook
What is BNPL
Buy now, pay later (BNPL) allows consumers to buy something immediately and spread out the overall cost over time in incremental payments. This business model does not charge interest, but fees can quickly compound if payments are missed.
Over the last 5 years, this industry has exploded with a CAGR of 21.7% [1] largely driven by key providers: Afterpay, Zip, Humm, Latitude and Openpay, and this growth is expected to continue with a forecasted 10.2% CAGR from 2025-2030.
BNPL Industry History
BNPL gained significant traction during COVID-19 when the world was pushed inside and onto their computers towards e-commerce shopping.
During this time, BNPL became a mainstream payment method, being adopted by various online checkout channels for both small and large retailers, and by consumers.
The appeal is clear: BNPL allowed people to split purchases into manageable, often interest-free instalments, making it easier to budget for both everyday and unexpected expenses at a time of heightened financial uncertainty.
As the pandemic accelerated digital adoption, BNPL’s convenience and accessibility made it especially attractive to those with limited access to traditional credit, particularly younger consumers, who accounted for a significant share of the market in both Australia (37% aged 18–24) and the US (26% aged 18–29), as well as those without established credit histories.
Since then in the post-COVID period, the use of BNPL diversified rapidly, expanding from traditional retail into essential categories like fuel and groceries, as well as experiences such as festival tickets and travel.
This evolution reflected both consumer demand for flexible payment solutions amid rising living costs and merchants’ efforts to boost sales and attract new customers in a changing economic landscape.
Benefits of BNPL
Interest-free loans (but only when repaid on time!)
Most BNPL plans are interest-free if you pay on time, allowing consumers to avoid the high interest charges typically associated with credit cards or payday loans.
This makes BNPL an appealing option for those looking to manage their finances without incurring extra costs. If repayments are late, oftentimes the borrower will need to pay late fees rather than high interest rates that conventional credit cards would charge.
It’s simple and easy
The application and approval process for BNPL is easy and fast, often requiring only a few clicks at checkout and minimal personal information.
This quick and simple sign-up experience has contributed to its popularity, especially among younger and tech-savvy users.
Spread out repayments
BNPL helps with budget management by spreading the cost of purchases over several instalments, allowing consumers to better plan their spending and more easily afford larger or unexpected expenses without straining their finances. By letting users keep their money for longer and pay in instalments, BNPL takes advantage of the idea that money is more valuable when you have it now rather than later. This means consumers can use their available cash for other needs or opportunities before making the full payment, giving them more control and flexibility over their finances.
Shortcomings of BNPL
Late Fees
Missing payments with BNPL often results in late fees, which can quickly add up and make purchases more expensive than originally planned.
For consumers who are already managing tight budgets, these extra charges can create additional financial stress and make it harder to keep up with other bills.
Overspending
The easy access and convenience of BNPL can also encourage people to spend beyond their means.
Because the payment process is so simple and requires only a small upfront amount, some consumers may be tempted to make purchases they cannot realistically afford, leading to increased financial strain over time.
This risk is especially pronounced among people with lower repayment abilities, who are often drawn to BNPL to manage immediate expenses.
In fact, 16% of US BNPL users come from households with annual incomes under $25,000, with 40% of them paying late, highlighting that many users may already be financially vulnerable and at greater risk of falling behind on payments.
Credit Impacts
Some BNPL providers report missed or late payments to credit bureaus, which can harm a person’s credit score and make it more difficult to access other forms of credit in the future.
As more consumers struggle to keep up with their instalment payments, default rates may rise, reducing the overall ability of households to manage and repay other debts. This trend can have broader economic implications, as increased defaults and financial strain among BNPL users may contribute to instability in the wider credit market and affect economic resilience.
The future of BNPL
The future outlook for BNPL is marked by strong growth and deeper integration into everyday spending. As the market continues to expand, BNPL is becoming a mainstream payment option not just for retail, but for essential purchases and experiences.
In the US, 25% of BNPL users reported using these services to buy groceries in 2025, up significantly from 14% in 2024[2], and 60% of Coachella tickets in 2024 were purchased with BNPL[3].
In Australia, one-third of the population now uses BNPL[4], reflecting its widespread appeal. This growth is supported by greater integration with merchants and a broadening range of products and services, positioning BNPL as an increasingly common tool for managing everyday expenses and larger discretionary purchases.
However, the rapid adoption of BNPL also raises concerns about overreliance and financial vulnerability.
In 2024, 15% of Americans were using BNPL, and late repayments have become more common, with 24% of repayments being late in 2024, up from 18% in 2023[5].
The rising use of BNPL for essentials like groceries suggests that more consumers are relying on these services to cover basic needs, which could signal underlying financial stress. As late payments increase and more users stretch their budgets with BNPL, there is a risk of higher default rates and greater financial strain for households, potentially impacting overall credit health and economic stability.
Will regulation hinder growth?
Australia is about to introduce major reforms that will bring BNPL providers under stricter regulation, closing loopholes that previously allowed them to operate without a credit licence.
If approved, the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024[6] will require BNPL companies to obtain a credit licence and comply with responsible lending practices, like traditional credit providers.
This means BNPL companies will face more compliance and operational costs, and consumers will be better protected from unmanageable debt.
While these reforms are expected to build greater trust and transparency in the BNPL sector, they will also make it harder for some people to access these services. The easy access to credit that has driven BNPL’s popularity will be restricted, which could slow the market’s rapid growth and reduce revenues for providers that rely on late fees.
The RBA is also reviewing the surcharge framework, which may allow merchants to pass on extra costs to consumers.
Overall, these changes are set to reshape the BNPL landscape, making it safer but potentially less accessible and less profitable for providers in the coming years.
Kurtis Castorina Investment Strategist, Your Future Strategy
The following article was taken from the Daily Mail UK over the weekend. Read the article in full below: https://www.dailymail.co.uk/news/article-15086613/Retirement-rental-nightmare-new-cities.html
The following article was taken from the Australian Financial Review, over the weekend. Read the article in full below: https://www.theaustralian.com.au/wealth/retirement/retirement-redefined-changing-roles-of-money-work-and-play/news-story/6cde0e8bb53bceb8950c0b01c6832f63
I think we’re all familiar with the buy now, pay later model. Allowing consumers to purchase items immediately and spread out the overall cost over time in incremental payments. It’s a trap that consumers can fall in, so it’s important to understand the full model.
Key Points
What is BNPL
Buy now, pay later (BNPL) allows consumers to buy something immediately and spread out the overall cost over time in incremental payments. This business model does not charge interest, but fees can quickly compound if payments are missed.
Over the last 5 years, this industry has exploded with a CAGR of 21.7% [1] largely driven by key providers: Afterpay, Zip, Humm, Latitude and Openpay, and this growth is expected to continue with a forecasted 10.2% CAGR from 2025-2030.
BNPL Industry History
BNPL gained significant traction during COVID-19 when the world was pushed inside and onto their computers towards e-commerce shopping.
During this time, BNPL became a mainstream payment method, being adopted by various online checkout channels for both small and large retailers, and by consumers.
The appeal is clear: BNPL allowed people to split purchases into manageable, often interest-free instalments, making it easier to budget for both everyday and unexpected expenses at a time of heightened financial uncertainty.
As the pandemic accelerated digital adoption, BNPL’s convenience and accessibility made it especially attractive to those with limited access to traditional credit, particularly younger consumers, who accounted for a significant share of the market in both Australia (37% aged 18–24) and the US (26% aged 18–29), as well as those without established credit histories.
Since then in the post-COVID period, the use of BNPL diversified rapidly, expanding from traditional retail into essential categories like fuel and groceries, as well as experiences such as festival tickets and travel.
This evolution reflected both consumer demand for flexible payment solutions amid rising living costs and merchants’ efforts to boost sales and attract new customers in a changing economic landscape.
Benefits of BNPL
Interest-free loans (but only when repaid on time!)
Most BNPL plans are interest-free if you pay on time, allowing consumers to avoid the high interest charges typically associated with credit cards or payday loans.
This makes BNPL an appealing option for those looking to manage their finances without incurring extra costs. If repayments are late, oftentimes the borrower will need to pay late fees rather than high interest rates that conventional credit cards would charge.
It’s simple and easy
The application and approval process for BNPL is easy and fast, often requiring only a few clicks at checkout and minimal personal information.
This quick and simple sign-up experience has contributed to its popularity, especially among younger and tech-savvy users.
Spread out repayments
BNPL helps with budget management by spreading the cost of purchases over several instalments, allowing consumers to better plan their spending and more easily afford larger or unexpected expenses without straining their finances. By letting users keep their money for longer and pay in instalments, BNPL takes advantage of the idea that money is more valuable when you have it now rather than later. This means consumers can use their available cash for other needs or opportunities before making the full payment, giving them more control and flexibility over their finances.
Shortcomings of BNPL
Late Fees
Missing payments with BNPL often results in late fees, which can quickly add up and make purchases more expensive than originally planned.
For consumers who are already managing tight budgets, these extra charges can create additional financial stress and make it harder to keep up with other bills.
Overspending
The easy access and convenience of BNPL can also encourage people to spend beyond their means.
Because the payment process is so simple and requires only a small upfront amount, some consumers may be tempted to make purchases they cannot realistically afford, leading to increased financial strain over time.
This risk is especially pronounced among people with lower repayment abilities, who are often drawn to BNPL to manage immediate expenses.
In fact, 16% of US BNPL users come from households with annual incomes under $25,000, with 40% of them paying late, highlighting that many users may already be financially vulnerable and at greater risk of falling behind on payments.
Credit Impacts
Some BNPL providers report missed or late payments to credit bureaus, which can harm a person’s credit score and make it more difficult to access other forms of credit in the future.
As more consumers struggle to keep up with their instalment payments, default rates may rise, reducing the overall ability of households to manage and repay other debts. This trend can have broader economic implications, as increased defaults and financial strain among BNPL users may contribute to instability in the wider credit market and affect economic resilience.
The future of BNPL
The future outlook for BNPL is marked by strong growth and deeper integration into everyday spending. As the market continues to expand, BNPL is becoming a mainstream payment option not just for retail, but for essential purchases and experiences.
In the US, 25% of BNPL users reported using these services to buy groceries in 2025, up significantly from 14% in 2024[2], and 60% of Coachella tickets in 2024 were purchased with BNPL[3].
In Australia, one-third of the population now uses BNPL[4], reflecting its widespread appeal. This growth is supported by greater integration with merchants and a broadening range of products and services, positioning BNPL as an increasingly common tool for managing everyday expenses and larger discretionary purchases.
However, the rapid adoption of BNPL also raises concerns about overreliance and financial vulnerability.
In 2024, 15% of Americans were using BNPL, and late repayments have become more common, with 24% of repayments being late in 2024, up from 18% in 2023[5].
The rising use of BNPL for essentials like groceries suggests that more consumers are relying on these services to cover basic needs, which could signal underlying financial stress. As late payments increase and more users stretch their budgets with BNPL, there is a risk of higher default rates and greater financial strain for households, potentially impacting overall credit health and economic stability.
Will regulation hinder growth?
Australia is about to introduce major reforms that will bring BNPL providers under stricter regulation, closing loopholes that previously allowed them to operate without a credit licence.
If approved, the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024[6] will require BNPL companies to obtain a credit licence and comply with responsible lending practices, like traditional credit providers.
This means BNPL companies will face more compliance and operational costs, and consumers will be better protected from unmanageable debt.
While these reforms are expected to build greater trust and transparency in the BNPL sector, they will also make it harder for some people to access these services. The easy access to credit that has driven BNPL’s popularity will be restricted, which could slow the market’s rapid growth and reduce revenues for providers that rely on late fees.
The RBA is also reviewing the surcharge framework, which may allow merchants to pass on extra costs to consumers.
Overall, these changes are set to reshape the BNPL landscape, making it safer but potentially less accessible and less profitable for providers in the coming years.
Kurtis Castorina
Investment Strategist, Your Future Strategy
[1] Buy Now Pay Later Global Business Report 2025: BNPL
[2] U.S. Shoppers Turn To Buy Now, Pay Later For Groceries As High Costs Bite
[3] 60% of Coachella 2025 Attendees Used Payment Plans; Tickets Start at $649 With $49.99 Down, No Interest | DeepNewz Fintech
[4] Buy Now, Pay Later: The New Grocery Lifeline for Australians
[5] 2025 Buy Now, Pay Later Trends Study | The Motley Fool
[6] Performance – OD5547 Buy Now Pay Later in Australia – MyIBISWorld