Australia Alternative Lending Business Report 2025: Market to grow by 13.2% to Surpass $20 Billion this Year - Size & Forecast by Value and Volume Across 100+ KPIs to 2029

Dublin, Nov. 06, 2025 (GLOBE NEWSWIRE) -- The "Australia Alternative Lending Market Size & Forecast by Value and Volume Across 100+ KPIs by Type of Lending, End-User Segments, Loan Purpose, Finance Models, Distribution Channels, and Payment Instruments - Databook Q4 2025 Update" report has been added to ResearchAndMarkets.com's offering.

Alternative lending market in Australia is expected to grow by 13.2% annually, reaching US$20.03 billion by 2025. The alternative lending market in the country has experienced robust growth during 2020-2024, achieving a CAGR of 13.8%. This upward trajectory is expected to continue, with the market forecast to grow at a CAGR of 13.8% from 2025 to 2029. By the end of 2029, the alternative lending market is projected to expand from its 2024 value of US$17.70 billion to approximately US$33.58 billion.

This report provides a detailed data-centric analysis of the alternative lending industry in Australia, offering comprehensive coverage of both overall and alternative lending markets. It covers more than 100+ KPIs, including loan disbursement value, loan disbursement volume, average loan ticket size, and penetration rate.



Australia's alternative lending market is moving from rapid product-led growth to policy-aligned, data-enabled scaling. BNPL's shift under the credit regime resets conduct and underwriting norms; embedded finance is becoming tangible through platform partnerships like Zip-Xero-Stripe; and CDR expansion prepares richer data rails for consented lending. Over the next 2-4 years, operators that combine licensing-ready compliance, embedded distribution, and data-driven risk controls will sustain share as funding and regulatory expectations rise.

BNPL transitions from light-touch to full credit regulation

BNPL is shifting from a lightly regulated product to one governed by Australia's consumer credit laws. From 10 June 2025, BNPL providers must hold an Australian credit licence and comply with responsible lending and disclosure requirements; ASIC has issued detailed guidance (RG 281) to implement the reforms.

Policymaker focus on consumer protection and consistency with the National Consumer Credit Protection framework.ASIC operationalising the law with licensing, conduct and remediation expectations for "low-cost credit" providers.

Business models will re-align to licencing and affordability checks. Expect tighter underwriting, revised merchant economics, and potential consolidation among smaller BNPL operators that cannot carry compliance overhead or funding costs.

Embedded lending deepens via platform integrations (SME & invoices)

Embedded credit is advancing through concrete platform tie-ups. In August-September 2025, Zip launched an integration with Xero (accounting) and Stripe (payments) so SMEs can offer customers installment options on invoices Zip funds the purchase while the business is paid upfront. This is a clear example of alternative credit embedded in daily SME workflows.

SMEs facing late-payment friction seek cash-flow tools embedded where invoices are raised and paid.Platforms are prioritising financial services features that reduce reconciliation effort and improve collections.

Expect more accounting/payments ecosystems to host credit options at point-of-workflow (invoicing, checkout, supplier payments). Providers that can evidence prudent credit checks (now required for BNPL) will scale faster through these channels.

Open Finance expands the data rails for non-bank lenders

Australia's Consumer Data Right (CDR) is being expanded to non-bank lending from mid-2026, with "action initiation" already legislated. Enforcement under CDR also tightened in 2025 (e.g., ACCC penalty against NAB for data-sharing breaches), underscoring rising expectations for data quality and availability that lenders can use, subject to consent, to streamline underwriting.

Government's CDR "reset" to widen coverage beyond banking and energy, enabling lenders to access verified consumer and SME data via accredited channels.Regulatory signalling that accurate, reliable data-sharing is now a compliance priority (with penalties for breaches).

Alternative lenders can progressively harness CDR data (with consent) for faster onboarding and more granular risk assessment. Competitive advantage will hinge on integrating CDR pipelines, explainable models, and compliant consent management as non-bank datasets come online.

Broker-led distribution strengthens SME alternative lending

SME non-bank lenders are leaning into the broker channel as a primary origination path. In early 2025, OnDeck Australia reported a sharp upswing in broker-originated volumes, reflecting brokers' role in matching SMEs to faster, fit-for-purpose credit when bank appetite tightens.

SMEs seeking speed and certainty leverage brokers who can navigate multiple non-bank options and underwriting rules.Lenders invest in broker programs and service-level improvements to capture share in the sub-$250k working-capital segment.

Distribution will skew further toward multi-channel origination, brokers, platform embeds, and direct digital. The lenders that win will pair broker reach with rigorous credit processes compatible with BNPL-style obligations and evolving open-finance data access.

Competitive Landscape: Australia's Alternative Lending Sector:

Australia's alternative lending market is entering a phase of structural maturity. Regulatory reform particularly in the BNPL space has raised the barrier to entry, shifting competition toward compliance-capable and capital-efficient players. Consolidation, such as Prospa's acquisition of Zip Business's lending portfolio, reflects this evolution, while new merchant partnerships demonstrate that embedded lending remains a powerful channel. Over the next two to four years, the sector will reward those operators who can align regulatory expectations with credit resilience and embedded delivery marking a shift from rapid experimentation to sustainable growth.

Competitive Intensity and Market Positioning:

Alternative lending in Australia continues to play a significant, though still complementary, role in the broader credit ecosystem. While traditional banks remain dominant across mortgage and large-scale business lending, non-bank lenders have carved out meaningful positions in short-term consumer finance, small business working capital, and merchant cash flow products.

The highest competitive intensity currently sits in the consumer segment, particularly within Buy Now Pay Later (BNPL), where multiple players have achieved wide merchant integration and brand recognition.

However, the introduction of full licensing requirements for BNPL is beginning to shift the competitive dynamics from speed and distribution toward compliance-readiness and credit risk capability. In the SME segment, non-bank lenders are increasingly used as secondary or substitute providers when traditional credit appetite is limited or response times are slow.

Key Players and Recent Strategic Developments:

Among established players, Afterpay and Zip continue to lead in the BNPL market. In a significant distribution move, Afterpay was added as a payment option on Amazon Australia in September 2025, giving it access to one of the country's largest e-commerce platforms. This signals a clear move toward deeper merchant-level partnerships with high-volume retailers.

On the small business lending front, Prospa remains one of the most prominent names. In March 2024, Prospa acquired Zip Business's Australian commercial loan portfolio, marking a notable example of consolidation within the SME-focused alternative lending space. Capify, another active player, continues to operate in the merchant advance and unsecured loan segment, primarily targeting small enterprises with limited access to bank finance.

Consolidation and Portfolio Acquisitions:

While the broader M&A environment in Australian fintech remains cautious, the Prospa-Zip Business deal is a clear indicator that alternative lenders are beginning to rationalize their portfolios and shift toward more focused, scalable operations. This type of asset transfer highlights the cost pressures facing BNPL and SME lenders, especially as regulatory expectations increase and the cost of capital remains elevated. The lack of publicised venture-led acquisitions also points to a strategic pivot in the sector from growth-at-all-costs toward consolidation, capital efficiency, and lending book quality.

Recent Regulatory Changes Implemented:

A structural shift in the regulatory environment has redefined the operating landscape for alternative lenders most notably for BNPL providers. As of 10 June 2025, BNPL products fall under the National Consumer Credit Protection Act, requiring providers to obtain an Australian credit licence and comply with responsible lending obligations.

ASIC has issued detailed guidance through Regulatory Guide 281 (RG 281), outlining expectations for disclosure, hardship assistance, and affordability assessments. The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024, passed in November 2024, formally integrated BNPL into the country's regulated credit framework.

This change was reinforced by AFCA's public endorsement of the reforms, which it said would better align BNPL products with broader consumer protection objectives. These regulatory adjustments raise the baseline for participation, making it more difficult for thinly capitalised or operationally immature providers to remain viable in the long term.

Outlook on Market Competition and Strategic Positioning:

The competitive dynamics in Australia's alternative lending sector are likely to shift from product-led growth to scale-led sustainability. As regulatory compliance becomes non-negotiable, operators with established licensing infrastructure, governance controls, and balance sheet strength will be better positioned to consolidate market share.

BNPL is expected to undergo further rationalisation, with smaller or mono-product firms struggling to meet compliance and funding demands. In parallel, SME-focused lenders will increasingly compete on service quality, speed, and embedded access particularly through broker networks or integrations with accounting and payment platforms.

Strategic partnerships between fintechs and large institutions may increase, particularly as traditional banks explore white-label offerings or acquisitions to maintain relevance in emerging credit categories. Competitive advantage will rest less on user acquisition velocity and more on operational discipline, embedded distribution, and trust with both regulators and borrowers.

Key Attributes:

Report AttributeDetailsNo. of Pages200Forecast Period2025 - 2029Estimated Market Value (USD) in 2025$20.03 BillionForecasted Market Value (USD) by 2029$33.58 BillionCompound Annual Growth Rate13.8%Regions CoveredAustralia

For more information about this report visit https://www.researchandmarkets.com/r/rq026d

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Australian Alternative Lending Market