Investing in ASX buy now, pay later (BNPL) shares

What are buy now, pay later (BNPL) shares?

Buy now, pay later (BNPL) refers to a group of financial technology companies that offer short-term financing options for everyday retail transactions. Instead of paying the full price upfront, customers can split the cost into smaller instalments over time, often with quick approval and minimal friction at checkout.

While BNPL is a relatively modern form of personal lending, it shares similarities with traditional lay-by agreements. Both allow shoppers to spread the cost of purchases across multiple payments. However, there is one key difference: with lay-by, customers typically have to wait until the item is fully paid off before taking it home. BNPL services, by contrast, allow customers to receive the product or service immediately while paying it off in instalments.

BNPL may sound similar to a standard personal loan, but the business model works differently. Most BNPL providers do not charge interest on purchases if payments are made on time. Instead, they primarily generate revenue by charging merchants a fee to offer BNPL at checkout.

Retailers accept these fees because BNPL approvals are usually completed within seconds, making it easier for customers to complete purchases and often increasing overall sales. The model has grown rapidly in Australia. The local BNPL market expanded at a compound annual growth rate (CAGR) of about 19.8% between 2021 and 2024 and is expected to reach roughly US$14.52 billion in transaction value in 2025. Growth is projected to continue, with the sector forecast to expand to approximately US$21.87 billion by 2030¹.

Why invest in BNPL?

In an ideal world, BNPL companies enable consumers making large purchases to budget effectively. It's a valuable service because it allows people to purchase items they can't afford to pay off in one hit without relying on high-interest credit cards or personal loans.

This has made BNPL providers very popular with consumers. Brands like Afterpay, Zip, and Humm have quickly become household names, particularly with younger demographics. And the fact that they don't charge interest on purchases means that – when used responsibly – they can help people avoid falling into cycles of debt.

The popularity of these services is reflected in their widespread adoption across Australia. There are now around 7 million active BNPL accounts in the country² — a significant figure given Australia's population of roughly 26 million people.

Investing in BNPL companies means you can also profit from their popularity, which is an appealing reason to buy their shares.

However, it would be remiss of us not to also note the risks involved in BNPL shares. After rising to astronomical highs over the past few years – particularly during COVID-19 lockdowns when more consumers than ever were shopping online – most BNPL shares are now trading at historic lows.

Depending on your view of the BNPL industry, now could be a great time to invest to capitalise on a potential price resurgence. Or it could mean investors should avoid these shares entirely!

Top BNPL stocks on the ASX

Depending on the company, BNPL shares may be classed under the financials or information technology (IT) sectors on the ASX. For example, Block Inc CDI (ASX: XYZ), the American payments juggernaut that acquired Afterpay in 2022, is grouped under IT because it offers diverse technology products.

Zip Co Ltd (ASX: ZIP), on the other hand, is included in the financials sector along with Humm Group Ltd (ASX: HUM), given their principal business is providing short-term financing. 

However, sometimes the groupings can seem a little arbitrary. Fellow BNPL companies Splitit Ltd (ASX: SPT) and Sezzle Inc (ASX: SZL) are also included in the IT sector, despite appearing to have similar product offerings to Zip and Humm.
Here, we profile three BNPL companies ranked by market capitalisation from highest to lowest.

Block

Block, which changed its ASX ticker from SQ2 to XYZ after acquiring Afterpay, is a United States global technology and financial services company. It is best known for building digital payments tools that help businesses and consumers send, receive, and manage money. Its ecosystem includes merchant payments through Square, peer-to-peer payments via Cash App, and buy now, pay later services through Afterpay.

Block entered the BNPL space in 2021 with the acquisition of leading Australian provider Afterpay in an all-scrip deal valued at about $39 billion. Afterpay helped popularise the BNPL model by allowing customers to split purchases into instalments over six weeks, typically without paying interest if repayments are made on time. Instead, the company generates most of its revenue by charging merchants a fee to offer the service at checkout.

Today, Afterpay forms part of Block's broader fintech ecosystem connecting merchants and consumers. In the year ending 31 December 2025, Block generated US$10.36 billion in gross profit, reflecting continued growth across its payments and financial services platforms.

Like many fintech companies, however, Block's share price has been volatile in recent years. The stock has experienced sharp swings amid broader technology sector uncertainty and mixed earnings reactions, with periods where the share price has dropped significantly as investors reassess growth expectations.

Zip

Zip is Afterpay's next biggest rival – at least in Australia. According to its December 2025 figures, Zip has 6.6 million active customers and is offered by more than 90,000 merchants, focused primarily in 2 core markets (US and Australia). It has partnered with many well-known brands, including Amazon.com, Inc. (NASDAQ: AMZN),JB Hi-Fi Limited (ASX: JBH), and Uber Technologies Inc (NYSE: UBER).

Zip remains a primary competitor to Afterpay, offering two distinct products. Zip Pay provides an interest-free line of credit up to $1,000 for everyday purchases and bills via BPAY (subject to a $2.50 fee). Repayments are flexible, starting from $10 per week, with the $9.95 monthly fee waived if the balance is paid in full by the due date.

For larger expenses, Zip Money offers limits between $1,000 and $5,000, extending up to $50,000 at select merchants like health or home providers. It features a standard three-month interest-free period, which can reach 60 months at specific retailers. However, Zip Money involves one-off establishment fees (up to $99) and a standard interest rate of 25.9% p.a. on any balance remaining after the interest-free term.

Like many companies in the sector, Zip's share price has been volatile. During the 2026 February earnings season, the stock sold off sharply after its half-year results, leaving the share price trading near recent lows.

Despite this, some analysts remain positive about the company's outlook. Macquarie has retained a buy rating on Zip, noting that while operating leverage has moderated as the company invests for growth, its underlying business model and unit economics remain attractive.

Humm

Humm Group Ltd is an Australian fintech company offering a range of consumer finance products, including BNPL services, credit cards, and small business lending. Its BNPL platform features two products: 'little things' for everyday purchases and 'big things' for higher-value items such as home appliances, travel, solar systems, and certain health services, helping it stand out from other BNPL providers.

After a planned sale of its BNPL assets to Latitude Group fell through, Humm has focused on stabilising its business. For the six months to 31 December 2025, the company reported higher profits, steady margins, and robust credit quality, while continuing a broader transformation aimed at strengthening its loan products and supporting long-term growth.

Analysts remain positive on Humm shares in 2026, noting that the company's ongoing improvements and solid fundamentals could support further growth. Brokers like Ord Minnett have retained buy ratings, highlighting the stock's attractive valuation and potential upside as the transformation progresses.

What recent headwinds have impacted BNPL service providers in Australia?

The share prices of BNPL companies skyrocketed during the pandemic, driven by a surge in online shopping and easy integration with e-commerce platforms. But from 2022 onwards, the sector entered a painful reset — rising inflation, higher interest rates, and weakening consumer confidence hit BNPL stocks hard, and some smaller players didn't survive.

The sector has since staged a meaningful recovery. Surviving providers abandoned the "growth at all costs" playbook in favour of tighter credit standards and a path to profitability — and investors responded. ASX-listed BNPL stocks were among the best performers on the local market in 2024, with some recording gains of several hundred per cent off their lows.

The broader outlook also supports renewed optimism. Global BNPL transaction values are projected to reach $560 billion in 2025, up 13.7% year-on-year, while nearly two in five Australians used a BNPL service in the six months to March 2024.

That said, volatility hasn't disappeared. The sector remains sensitive to shifts in consumer spending, credit quality, and growing competition from banks and global players — meaning BNPL shares can still swing sharply on earnings results or changes in the economic outlook.

Tougher regulations

The question of how to regulate BNPL in Australia has now been settled. Previously, BNPL companies operated outside the Credit Act by arguing they technically didn't provide 'credit' (because they don't charge interest). This allowed them to skip background checks and approve customers almost instantly — a clear competitive advantage over traditional lenders.

That changed when the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 received royal assent on 10 December 2024, extending the National Credit Code to BNPL products. From 10 June 2025, providers are required to hold an Australian credit licence and comply with responsible lending obligations³. The framework is designed to be proportionate to the risk of consumer harm, meaning smaller, low-cost purchases face lighter obligations than larger credit products.

The transition appears to have gone more smoothly than some had feared. Research from Experian and Afterpay released on the day the laws took effect found that more than half of BNPL users said they feel more confident using the products now that the sector is regulated. The added compliance costs remain a consideration for smaller providers, but the larger players were well-prepared — many were already meeting credit licensing standards before the laws came into force.

What are the benefits of investing in BNPL shares?

Very popular: BNPL companies have proven to be a hit with consumers and merchants alike. Just about every retailer you shop with now offers a BNPL option. For consumers, it provides short-term financing without interest charges. For merchants, it increases sales by allowing consumers the ability to buy products they can't currently afford.

High growth: Although things have turned sour for the BNPL sector recently, it wasn't long ago that BNPL share prices were surging. There's nothing to say that won't happen again once the economy re-enters a growth phase. This could make those savvy investors who picked up BNPL shares when they were cheap rich indeed!

And the cons?

Regulatory risk: The risk of tighter regulations has been with BNPL ever since the industry's inception. With the Federal government recently changing many of the rules BNPL companies must follow, it remains to be seen what lasting impacts this might have on the industry (or whether further changes are still yet to come).  

Highly cyclical: BNPL shares have proven themselves to be only fair-weather friends to investors. When the economy is booming and household spending is high, BNPL stocks have flourished. But once things get rocky and consumer confidence drops, their share prices plummet. This means they aren't good shares to hold in a crisis.

Threats from large banks: Large banks or other financial services companies entering the BNPL market can quickly erode the market share of existing BNPL companies. Consumers may prefer to simply use a product their current banking provider offers.

Are ASX BNPL stocks a good investment?

Recent share price drops have revealed significant weaknesses in the BNPL sector. Rising interest rates, inflation concerns, and disruptions to supply chains have all dampened consumer confidence, which makes the short-term outlook for the industry hard to predict (but not very rosy). And that's not to mention the impacts tighter government regulation might have on the broader industry!

However, BNPL is popular with customers, who took the service up in record numbers during the pandemic. And despite the near-term uncertainty, there may still be growth opportunities in the BNPL sector over the longer term. 

But the sector is already crowded with many companies offering similar products, so not all newcomers will survive.

This might make investing in BNPL shares a bit risky. So, before investing, do your homework and ensure BNPL shares fit within your risk appetite.