Gen Z drives surge in BNPL use as PayPal Pay in 4 gains ground
Buy Now Pay Later (BNPL) services are experiencing substantial growth in Australia, according to new research, with Gen Z emerging as the most significant driver behind this shift away from traditional credit cards.
Generational shift
The study, undertaken with a nationally representative sample of 1,022 Australians aged 18-75, found that more than a third of Australians (37%) have used BNPL for online purchases in the past six months. This marks an increase of 11% from the previous year, when 26% of respondents reported using BNPL.
The preference for BNPL is most pronounced among Millennials and Gen Z. Millennials remain the largest BNPL user group for online purchases, with 53% adoption. Gen Z shows a clear generational change: for the first time, a higher proportion used BNPL (38%) than credit cards (32%) for online purchases. For Millennials, the usage rates for BNPL and credit cards are now nearly equal, with just a one percentage point gap.
Spending patterns
The research highlights differences in spending habits between generations. Gen Z averages AUD $111 per BNPL transaction, higher than Millennials (AUD $102), Gen X (AUD $99), and Boomers (AUD $93). Gen Z also records more frequent usage, averaging 3.1 BNPL transactions per month compared to an average of 2.9 per month for other generations. Despite high BNPL uptake, Gen Z continue to favour debit cards, with 81% reporting debit card usage for online payments in the last six months.
"Gen Z are reshaping how Australians pay online. They want greater control over how they spend and manage credit, and that's why flexible, transparent options like BNPL resonate so strongly. PayPal Pay in 4, with no late fees or interest, is meeting this demand and supporting their shift towards smarter ways to pay," said Andrew Toon, General Manager, PayPal Australia's payments business.
Reasons for adoption
Australians cite several reasons for choosing BNPL services. The most common motivations include spreading out the cost of larger purchases (65% of BNPL users), managing cost-of-living pressures (51%), and maintaining better control over budgets and cashflow (51%). Flexibility is valued by 48% of users, while 42% say BNPL repayment structures are easier to manage than those of other credit products.
PayPal Pay in 4 growth
PayPal Pay in 4 has emerged as a significant player in the Australian BNPL market. Its share among BNPL users rose from 45% to 51% year-on-year, representing 13% annual customer growth. Nearly half of BNPL users (48%) stated they switched to PayPal Pay in 4 because it does not charge late fees, a factor cited most often by Gen X (53%) and Millennials (52%).
Businesses seeking to improve online conversion may benefit from offering BNPL options. According to the research, Australians are more than twice as likely to make a purchase from a website that offers PayPal Pay in 4 compared to one that does not-a 116% uplift in likelihood. More broadly, Australians are 82% more likely to buy from a website offering any BNPL service than one that does not.
"BNPL use in Australia is growing strongly, driven not just by popularity but by the practical financial support it offers during this time of high living costs. PayPal Pay in 4, now chosen by more than half of Australia's BNPL users, has surged to become the second most-used BNPL service. With no late fees or interest, PayPal Pay in 4 gives Australians the flexibility and confidence to manage larger purchases," said Toon.
