BNPL providers charge retailers a fee to offer digital consumers their ‘free’ four-part time-limited instalment payback plans at the checkout, with the quid pro quo being extra business for the firm. It’s been well worth paying the fee for hard-pressed retailers trading through the present cost of living crisis.
But will this relatively new type of deferred payment credit (DPC) developed last decade, as the UK Financial Conduct Authority (FCA) insists on calling BNPL in its new regulations published in February 2026, continue to provide a lifeline during these tough times?
“For a lot of retailers, BNPL has become a revenue growth hack,” explains Sreeraman Mohan Girija , Co-Founder of Fynd, an Indian unified commerce retail technology firm headquartered in Mumbai with offices in Dubai and London, which counts Diesel among its many fashion inventory and retailer clients. “It was just a question of plugging it in and watching conversion rates climb, with no need to ask if the customer could afford the purchase [because the BNPL provider delivers everything from the credit to the risk and full-service procedure –Ed.]. The new incoming FCA regulation rightly corrects that [with the affordability check onus on the provider –Ed.].”
Imminent UK BNPL regulation
The new UK FCA rules coming into effect on 15th July 2026 do indeed necessitate upfront affordability checks and demand authorisation procedures in future for all BNPL providers. This is alongside a new complaints procedure handled by the UK Financial Ombudsman Service. The intention is to protect consumers from rising debt and unclear terms and bring BNPL under the auspices of a tailored version of the UK Consumer Credit Act 1974.
The UK regulations follow-on from last year’s earlier moves to tighten the rules around the sector from the US nation-leading New York State Department of Financial Services (NYDFS) and the Australian Securities and Investments Commission (ASIC) stipulations, among many other such global efforts.
According to Fynd’s Co-Founder, such worldwide moves to govern the BNPL sector more tightly mean retailers must think much more deeply about how they offer payment flexibility – and not just rely on a single provider anymore. “The strongest are already doing so and offering multiple BNPL providers at the checkout. ASOS UK [a client of Fynd’s -Ed.], JD Sports, Boohoo and others have been doing this for years because they know different providers run different credit models.”
“When affordability screening tightens approval rates, a single-provider retailer absorbs the full conversion hit,” he explains. “But with multiple providers, a customer declined by one may still be approved by another, within responsible lending parameters of course. That is better for the retailer and the consumer.”
“Regulation won’t kill demand for payment flexibility in my opinion,” says Fynd’s Co-Founder. “Instead, it forces retailers to stop treating BNPL as a blunt instrument and to build real optionality into their checkout experience.”
A changing marketplace
A multitude of providers is no bad thing and the changes upstream from a corporate treasury’s accounts receivable (AR) procedure shouldn’t be disruptive, accepting a potential fall in volumes. However, Rich Bayer, CEO at Clearpay, speaking at the FT Live Future of Retail 2025 event in London last quarter, believes there might be a reduction in the number of providers instead, as lesser players are driven from the marketplace in the face of more regulation, but the impact on volume needed to be adverse. Bayer said he’d already seen this in Australia after the earlier ASIC rules came into effect there last year.
Known as Afterpay in Austral Asia, the CEO also believes the new regulations we’re seeing globally might additionally open up the BNPL market to new audiences, as the sector is proven to be more professional than ever before. Conversely, this could grow the market, he hopes.
It won’t just be millennials accessing BNPL any more under this scenario, so the market size – estimated to be 10.9 million-strong in the UK alone by the FCA in 2024, representing 20% of that country’s population – might still continue to grow. Older ‘silver surfer’ borrowers could be attracted to a more professional product, argued Bayer, who went on to claim he was “excited” about the imminent UK FCA regulations.
“We will be compliant by the UK July 2026 deadline,” he said at the recent FT Live event in London, while urging attendees to remember the USP of the product. “We are very different from credit cards that only make money arising from consumer failures to pay. BNPL is the opposite. We make our money from retailers.”
However, consumers that miss their ‘free’ instalments do have to pay eventually, hence the new regulations. The question for retailers is will the cost/benefit equation, and upfront fee for them, still favour retail participation if the increased rules translate into lower BNPL usage, as some fear? Time will tell on that, as will if consumers and new audiences are keen on the new regime.
BNPL needs to enter mainstream with full consumer protections
According to Alison Walters, Director of Consumer Finance at the FCA, speaking to Treasury Today exclusively, the need for Buy Now Pay Later regulation is nevertheless clear: “BNPL is used by millions, so it’s right that it will soon come with proper protections.”
“The changes we’ve set out will mean consumers get clearer information, checks to make sure borrowing is affordable, and access to support and the Financial Ombudsman Service, if things go wrong,” continues Walters.
“We want the sector to thrive. So, we’ve taken a proportionate approach, relying on the consumer duty and existing requirements, while ensuring there are strong protections in place for consumers.”
A case perhaps of regulate now and assess later (RNAL?) therefore now awaits watchers of this marketplace. Retailers will hope the golden goose continues to lay much needed golden revenue eggs during the present adverse economic climate.
