The Australian Securities and Investments Commission (ASIC) began enforcing a new regulatory regime for buy now pay later (BNPL) and low cost credit products on June 10.
The changes, outlined in ASIC’s Regulatory Guide 281, are the result of the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024 and represent the most substantial overhaul of consumer credit regulation in the payments space in recent years.
The popularity of BNPL and low cost credit products has soared, but so too have concerns about consumer outcomes. Unlike traditional credit, BNPL products have not previously been subject to the same responsible lending checks or fee transparency requirements.
This regulatory gap has led to situations where consumers, particularly younger or financially vulnerable users, have accumulated debts across multiple platforms without adequate affordability checks.
The government’s response has been to bring these products under the same regulatory umbrella as other forms of consumer credit. This idea is to reduce the risk of consumer harm while preserving the flexibility and convenience that have made BNPL so attractive to merchants and customers alike.
What the new regime means for providers
From today, any provider of BNPL or low cost credit must hold an Australian credit licence. This is a significant change for many fintechs and payment firms that have previously operated outside the traditional credit licensing regime. The licensing requirement brings with it a range of ongoing compliance, reporting, and customer care obligations.
Fee structures are also affected. The new rules introduce caps on the total amount of fees and charges that can be levied on a consumer within a 12-month period. This is designed to prevent providers from relying on excessive late fees or other charges as a core revenue stream. While certain charges—such as government fees and enforcement costs—are excluded from the cap, most other fees are now tightly controlled.
Perhaps the most operationally significant change is the introduction of responsible lending obligations. Providers must now make reasonable inquiries into a consumer’s financial situation and assess whether a product is suitable before approval.
While these obligations are modified for low cost credit, providers must not approve credit that is unsuitable for the consumer’s circumstances.
Impact on payment flows and merchant relationships
These changes will require a careful review of onboarding, risk assessment, and ongoing monitoring processes.
Providers will need systems to track cumulative fees across all contracts with a consumer, and to ensure that affordability checks are robust and well-documented. This may require investment in technology, staff training, and compliance resources.
Merchants offering BNPL at checkout may notice changes in customer experience, particularly if approval processes become more rigorous or if certain consumers are declined based on affordability assessments. Providers will need to manage these merchant relationships carefully, ensuring that any changes to customer flows or conversion rates are clearly communicated and understood.
Strategic implications for the sector
The new regime is likely to drive greater standardisation and professionalisation across the payments industry. Smaller or less well-resourced providers may find the compliance burden challenging, potentially leading to consolidation or increased partnership activity.
At the same time, the reforms may enhance consumer trust in BNPL and low cost credit products, supporting sustainable long-term growth.
For established payment firms, the new rules offer an opportunity to differentiate on compliance, transparency, and customer care. Those able to adapt quickly and demonstrate robust systems will be well-placed to build stronger relationships with both regulators and customers.
ASIC has made clear that its goal is to maintain the unique benefits of BNPL and low cost credit while reducing consumer harm. As the new regime beds in, payment professionals should expect ongoing scrutiny and potential further adjustments as both industry and regulators respond to emerging risks and opportunities.
The key for providers will be to embed compliance into every aspect of their operations, from product design to customer service. Those who get it right will help shape the future of Australia’s fast-evolving payments landscape.
