Gen Z says no to credit cards and yes to BNPL

It’s official. Australians are ditching credit cards and turning to Buy Now Pay Later (BNPL) in record numbers, with new research showing more than a third of us are now using it to pay for online purchases.

According to the PayPal eCommerce Index 2025, 37 per cent of Australians used BNPL for online shopping in the past six months. That’s a rise of 11 per cent from last year.

The surge is being led by Gen Z, who are not only the most frequent users but have also overtaken every other generation in preferring BNPL over credit cards.

“Gen Z are reshaping how Australians pay online,” said Andrew Toon, General Manager of PayPal Australia’s payments business.

“They want greater control over how they spend and manage credit, and that’s why flexible, transparent options like BNPL resonate so strongly.”

Gen Z says no to credit cards

For the first time, more Gen Z Australians are using BNPL (38 per cent) than credit cards (32 per cent) for online purchases, making them the only generation to prefer BNPL over traditional credit.

Millennials remain the biggest BNPL users overall (53 per cent), but the gap between them and credit card users is closing fast.

Gen Z shoppers are also splashing out more per purchase, with an average BNPL spend of $111 per transaction, compared to $102 for Millennials and $93 for Boomers. They’re also using BNPL more often – averaging around three transactions a month.

Despite this, debit cards still rule the roost for younger Aussies, with 81 per cent of Gen Z using debit for online shopping in the last six months, showing they still prefer spending their own money where they can.

PayPal Pay in 4 dominates

When it comes to BNPL providers, PayPal Pay in 4 has emerged as one of the nation’s favourites. Over half (51 per cent) of BNPL users now use it, up from 45 per cent last year, giving PayPal a solid increase in customers.

“PayPal Pay in 4, with no late fees or interest, is meeting this demand and supporting their shift towards smarter ways to pay,” said Toon.

When asked why they’re turning to BNPL, most Aussies say it comes down to practicality. Around two-thirds (65 per cent) use it to spread out the cost of bigger buys, while just over half (51 per cent) say it helps them cope with the ongoing cost-of-living squeeze. Nearly half (48 per cent) reckon it simply gives them more flexibility than traditional credit options. It makes it easier to manage their money without the sting of interest charges.

With Aussie consumers’ budgets tight, no late fees or interest charges matter. Almost half (48 per cent) of BNPL users switched to PayPal Pay in 4 for this reason alone, particularly Gen X (53 per cent) and Millennials (52 per cent).

Small businesses that adopt BNPL are winning

For online retailers, offering BNPL is fast becoming a must-have. The research found Australians are more than twice as likely (116 per cent uplift) to buy from a website that offers PayPal Pay in 4 compared to one that doesn’t.

Across the board, Aussies are 82 per cent more likely to make a purchase if any BNPL option is available.

“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… It gives Australians the flexibility and confidence to manage larger purchases,” Toon said.

BNPL looks set to remain a favourite way to shop smarter, especially for the digital-savvy Gen Z crowd who’ve decided credit cards are a bit last decade.

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