Afterpay helped invent a category. The buy now, pay later model it popularised in Australia spread to dozens of markets, attracted billions in venture capital, and ultimately landed the company inside Block (formerly Square) in a deal worth approximately US$29 billion when it closed in 2022. That acquisition remains the largest Australian tech exit on record. But the buy now, pay later space Afterpay helped create has since grown complicated: tighter regulation, rising credit losses across the industry, and a consumer spending environment that has tested the model's core assumptions.
What Block has done with Afterpay
Since joining Block, Afterpay has been integrated more deeply into Block's broader merchant and consumer ecosystem. The strategic rationale was always about cross-selling: Afterpay's consumer base would funnel into Cash App (Block's peer-to-peer payments product), while Block's merchant network would expand Afterpay's checkout presence. That integration has moved slowly. Block has faced its own profitability pressures, and CEO Jack Dorsey's departure from the company's board signalled a period of internal reset. For Afterpay, that has meant operating with less autonomy than its founders imagined, while still being asked to grow.
Block has continued to invest in the Afterpay brand in Australia and the UK, where it retains strong consumer recognition. In the United States, the product operates primarily under the Cash App brand, reflecting how Block has chosen to position its consumer-facing services there. The Australian market remains one of Afterpay's most loyal, with a well-established merchant base spanning retail, fashion, and health services.
The regulatory shift is now real
For years, buy now, pay later products operated in a regulatory grey area in Australia. They were not classified as credit products under the National Consumer Credit Protection Act, which meant providers did not have to conduct the same affordability checks required of credit card issuers. That changed in 2024, when the federal government finalised reforms that brought BNPL products under a new, tailored regulatory framework. Providers must now conduct affordability assessments, hold Australian credit licences, and meet responsible lending obligations proportionate to the credit limit offered.
For Afterpay, this is a structural shift. The compliance overhead has increased, and the frictionless sign-up experience that drove its early growth is now constrained by verification and assessment requirements. The company has publicly supported a proportionate regulatory approach, but the impact on conversion rates at checkout is a live commercial question. Smaller BNPL competitors with thinner margins are feeling the pressure more acutely, which may actually benefit Afterpay by accelerating consolidation. Across the broader ASX tech sector in 2026, regulatory adaptation is becoming a competitive differentiator rather than a cost centre.
Competition has intensified on every front
When Afterpay launched in 2015, its main competitors were layby and credit cards. Today it faces Zip Co, Klarna, PayPal Pay Later, Commonwealth Bank's StepPay, and a cluster of vertical-specific BNPL players in healthcare, travel, and trade. The banks moving into this space is the most significant development. CBA and NAB-backed products carry the weight of existing customer relationships, branch networks, and balance sheets that pure-play BNPL companies cannot match. Klarna's continued international push and reported IPO preparations (it listed on the New York Stock Exchange in 2025) have also raised the competitive stakes.
Afterpay's response has been to lean into its merchant relationships and its data advantage. Having processed transactions across millions of Australian consumers for a decade, it holds detailed purchase behaviour data that it can use to improve targeting and reduce credit risk. That data asset is meaningful, but it only holds value if the product itself remains preferred at checkout.
Where the product is heading
Block has signalled a push toward making Afterpay more useful beyond the point of sale. Integrations with Cash App's savings and spending tools are intended to make Afterpay a broader financial management platform rather than a checkout widget. In Australia, that vision is still largely aspirational. The product remains primarily used for retail purchases, and expanding into bill payments, subscriptions, and recurring expenses has proven difficult to execute without creating the kind of credit dependency that regulators are watching closely.
There is also the question of merchant fees. Afterpay charges merchants a percentage of each transaction, which is its primary revenue source. Retailers have grown more resistant to those fees as margins tighten, and some large merchants have renegotiated terms or reduced Afterpay prominence in their checkout flows. The fee structure that made Afterpay's revenue model work at scale is now being contested on both sides: merchants pushing fees down, and regulators scrutinising the economics of the model overall.
The Australian fintech story is not finished
Afterpay's trajectory is a useful case study for understanding what happens when a genuinely innovative fintech product matures inside a large acquirer while facing regulatory and competitive headwinds simultaneously. The core insight behind BNPL, that many consumers prefer short-term, interest-free instalment credit over revolving credit card debt, remains valid. What has changed is the cost of delivering that product responsibly and competitively.
For Australian IT and business leaders watching the fintech space, Afterpay's experience illustrates how quickly a category can shift once regulation arrives and banks enter the market. It also shows that brand recognition built over a decade has real staying power. The Australian tech scale-ups that emerged in Afterpay's wake are watching closely as the company navigates what comes after the category-creation phase. Being the pioneer is an advantage. But it does not guarantee being the winner when the category grows up.