Shoppers have racked up nearly $1 billion in 'buy now, pay later' debt, with the spending habits of younger consumers increasingly shaped by the likes of Afterpay and zipPay, according to the corporate watchdog.

The Australian Securities and Investments Commission's first review of the industry shows a five-fold increase in users over the past two years, from 400,000 in 2015/16 to two million in 2017/18.

The number of transactions jumped from about 50,000 during April 2016 to 1.9 million in June 2018, with $903 million in outstanding balances at the end of the 2018 financial year.

ASIC commissioner Danielle Press said 60 per cent of buy now pay later users were between 18 and 34, while 40 per cent earned under $40,000.

"Although our review found many consumers enjoy using buy now pay later arrangements and plan to continue using them, there are some potential risks for consumers in using these products," she said.

"We found that buy now pay later arrangements can cause some consumers to become financially over-committed and liable to paying late fees."

ASIC said one in six users had either become overdrawn, delayed bill payments or borrowed additional money because of a buy now pay later arrangement, while 50 per cent of users said they were now spending more.

"Most consumers believe that these arrangements allow them to buy more expensive items than they would otherwise and spend more than they normally would," ASIC said in its release.

"Providers also use behavioural techniques which can influence consumers to make a purchase without careful consideration of the costs."

Buy now pay later arrangements have long been used to finance high-value purchases such as solar power products, health services, travel, and electronics, but are increasingly available for everyday purchases from retailers such as Big W, Target, Harris Scarfe and Kmart.

ASIC's review examined listed companies Afterpay and zipPay, as well as Certegy Ezi-Pay and Oxipay which are part the ASX-listed FlexiGroup.

BrightePay and Openpay were also put under the spotlight.

ASIC said it would continue to monitor the adequacy of consumer protections and review changes made by buy now pay later providers.

Last month, the federal government released draft laws that would allow ASIC to put pressure on buy now, pay later companies if it believes there is a risk of "significant consumer detriment".