👉 Background: Afterpay is the buy now pay later that hit the scenes in 2014. With its pay-in-4 model, it revolutionised how millions of Australians paid for clothes, beauty treatments and even flights. In 2016, Afterpay listed on the ASX at a $150 million market capitalisation. Over the next 6 years, it grew so rapidly that it was acquired in 2022 for $39 billion dollars by Block (previously known as Square).

👉 What happened: While Afterpay may have capped out of its hyper growth in Australia, it keeps growing overseas, processing over $50 billion worth of sales last year, which is more than double what they did just three years ago. But, from yesterday, all buy now pay later providers in Australia will need to start collecting income and expense info on applications so that they can assess whether the loan is suitable, just like traditional credit providers.

👉 What else: While other BNPL players like Zip have been doing this for years, it’s a major shift for Afterpay which wasn’t technically considered a credit product. And while this gives some more legitimacy to BNPL, it also limits Afterpay’s ability to bypass the lending laws.

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What's the key learning?

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💡When regulation lags behind innovation, the new innovative players thrive. But once the regulation catches up, only the strongest will survive.

💡Afterpay was able to supercharge its growth because it didn’t have to play by the same strict rules as banks and credit card providers - no credit checks, no responsible lending obligations. It meant that they could scale quickly without the red tape that others faced. But now, the new rules bring BNPL players like Afterpay under the same regulatory umbrella as other credit providers.

💡Thankfully for Afterpay, Australia has become a much smaller fraction of its entire business. In fact, Afterpay has around 3.5 million customers in Australia… and 24 million customers globally. The real test now is whether Afterpay can keep its edge when the playing field is finally level…and whether Australia even matters to Afterpay/Block anymore.