Australia Alternative Lending Business Report 2026: A $33.58 Billion Industry by 2029
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Key opportunities in Australia’s alternative lending market include leveraging regulatory shifts towards more credit-grade operations, embedding lending options within retail ecosystems, advancing underwriting with open finance, and expanding non-bank lending in SME sectors. These trends require compliance adherence, partnerships, and tech-driven strategies.
Australian Alternative Lending Market
Australian Alternative Lending Market ·GlobeNewswire Inc.
The alternative lending market in Australia is expected to grow by 15.2% annually, reaching US$23.07 billion by 2026. The alternative lending market in the country has experienced robust growth during 2020-2025, achieving a CAGR of 13.6%. This upward trajectory is expected to continue, with the market forecast to grow at a CAGR of 13.3% from 2026 to 2029. By the end of 2029, the alternative lending market is projected to expand from its 2025 value of US$20.03 billion to approximately US$33.58 billion.
Consolidation-by-compliance: BNPL licensing and AFCA dispute access will favour fewer, better-governed providers and reduce room for sub-scale models. Ecosystem-led distribution intensifies: Checkout, marketplaces, and accounting/payment platforms will be the primary “shelf space” for credit offers, with banks and BNPL specialists competing for the same merchant integrations. Private credit standards become a differentiator: ASIC’s work on private credit practices is likely to keep lifting expectations, shaping funding availability, and partnership credibility.
The report offers in-depth segmentation across lending dimensions, including type of lending (Bank-based/NBFC and Alternative Lending), end-user segments (Retail Lending and SME/MSME Lending), and loan types. It further categorizes the alternative lending ecosystem by finance models (P2P Marketplace, Balance Sheet, Invoice Trading, Real Estate Crowdfunding, and Other Models), distribution channels (Branch/Physical, Direct Digital, and Agent/Broker), and payment instruments (Credit Transfer, Debit Card, E-Money, and Others).
In addition, the analysis captures borrower demographics by age, income, and gender, alongside delinquency performance indicators. Collectively, these datasets provide a comprehensive and quantifiable view of market size, structure, lending behavior, and risk dynamics within the lending ecosystem.
Current State of the Market
Competition is concentrated but multi-layered: Australia’s alternative lending competition clusters around BNPL/instalments at checkout, non-bank consumer and SME lending, and private credit/warehouse funding that supplies balance-sheet capacity.
Regulation has raised the “right to compete”: Since 10 June 2025, BNPL credit activities have required an Australian credit licence, bringing BNPL closer to mainstream credit compliance and changing how providers design products, distribute through merchants, and manage complaints.
Banks are competing inside the same lane: Major banks continue to operate instalment products alongside BNPL specialists (e.g., CommBank StepPay, NAB Now Pay Later), intensifying competition for prime customers and merchant acceptance.
Key Players and New Entrants
BNPL/instalments: Afterpay and Zip remain central; Klarna competes via global merchant relationships; humm has adjusted its product set in response to the new regime.
Non-bank lending: Players such as Pepper Money (mortgages/non-bank lending) and digital lenders (e.g., Wisr in consumer lending) compete on distribution access, funding structures, and risk governance.
Private credit managers: Competitive pressure is rising as ASIC scrutiny pushes standards on conflicts, valuation, transparency, and terminology, reshaping how managers differentiate.
Key Trends & Drivers
Normalise BNPL and “low-cost credit” as regulated credit products
Australia is moving BNPL from a payments-adjacent product into the credit regulatory perimeter. From 10 June 2025, BNPL credit activities require an Australian credit licence and must operate under the credit framework overseen by ASIC, shifting compliance expectations toward credit-style governance (e.g., product design, distribution, and customer outcomes).
Policymakers have focused on consumer harm pathways (inappropriate product fit, hardship, and complaints handling) and have progressed detailed implementation through Treasury’s 2025 draft regulations process.
Competitive advantage will tilt toward providers that can run “credit-grade” operations (licensing, monitoring, and dispute handling). Product design will converge toward clearer affordability checks and stronger distribution controls, raising the cost of being a long-tail BNPL or niche instalment provider. AFCA coverage reinforces a more formalised post-sale discipline for BNPL disputes.
Push lending deeper into checkout and merchant ecosystems
Alternative credit is increasingly distributed inside retail and e-commerce journeys rather than via standalone lender acquisition. In Australia, large marketplaces and retailers are expanding BNPL options at checkout (e.g., Amazon Australia enabling Afterpay), while banks continue to ship their own instalment propositions (e.g., NAB Now Pay Later; CommBank StepPay).
Australian e-commerce and omnichannel retail flows create frequent “moment-of-purchase” credit demand; merchants value conversion support and basket completion, while lenders value transaction context and repeatable distribution.
Expect tighter coupling between lending offers and payment credentials (digital cards and in-app rails). Partnerships will be shaped by who can meet licensing and distribution obligations without slowing checkout. Market exits of sub-scale models will continue (e.g., LatitudePay closure), concentrating volume with fewer regulated operators.
Rebuild underwriting around verified cashflow signals and “open finance” controls
Australian lenders are increasingly relying on bank transaction visibility, consented data access, and stronger data governance both to sharpen underwriting and to evidence compliance. The Consumer Data Right (CDR) roadmap includes expansion to non-bank lending from 2026, while enforcement actions on banks underscore that data quality and controls matter.
Regulatory scrutiny is making “explainable decisions” and auditable customer outcomes more important, while competitive pressure favours lenders that can reduce friction without weakening checks.
Lenders that operationalise CDR-grade consent, data handling, and monitoring will be better positioned to scale partnerships (banks, brokers, platforms). Expect more standardisation in income/expense verification and more consistent treatment of BNPL within credit assessment workflows as the regime beds down.
Expand non-bank credit footprints in SME and specialist lending via funding discipline
Beyond BNPL, Australia’s alternative lending stack is broadening through non-bank lenders in personal and SME credit (e.g., Wisr, MONEYME, and Moula). Several players are emphasising diversified funding structures and broker/distribution expansion as they scale.
SMEs continue to seek faster working-capital decisions than traditional channels, and digital-originated lenders are building repeatable distribution via brokers and embedded partnerships. At the same time, funding markets reward tighter risk controls and clearer portfolio governance.
Expect a clearer split between (a) regulated mass-market instalment credit and (b) specialist lenders scaling through securitisation/warehouses and broker ecosystems. Consolidation will be selective, focused on distribution assets (e.g., broker books) and servicing capability rather than pure customer acquisition.
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