Buy Now Pay Later (BNPL)

Buy Now, Pay Later (BNPL) lets a customer spread the cost of a purchase over a short series of instalments, usually interest-free, often at the point of checkout. In UK regulation the product is referred to as deferred payment credit (DPC): interest-free credit repayable in a limited number of instalments over a short period, provided by a third party rather than the retailer selling the goods.

How BNPL works

At checkout, instead of paying in full, the customer chooses to pay in instalments — commonly a first payment at purchase and the balance over following weeks or months. A BNPL provider pays the retailer and collects the instalments from the customer. For the customer the headline is interest-free spreading of cost; the provider typically earns from merchant fees and from late or missed-payment charges where they apply.

BNPL under FCA regulation

BNPL was for several years largely outside the scope of FCA consumer-credit rules. That changed: deferred payment credit came under FCA regulation on 15 July 2026. Third-party lenders providing DPC through merchants must be FCA-authorised or operate under the temporary permissions regime, with the deadline to hold the necessary permissions or be registered set at 15 May 2026. Merchants that offer DPC directly, rather than through a third-party lender, are treated differently under the rules.

The new regime brings BNPL closer to other regulated credit. Key consumer protections include:

• Affordability checks — lenders must assess whether the borrower can sustainably afford the repayments.
• Clear information — customers must be given clear detail on repayment schedules and any charges.
• Support in difficulty — lenders must treat customers in financial difficulty fairly.
• Access to redress — consumers can complain to the Financial Ombudsman Service for agreements entered into from 15 July 2026, and Section 75-style protection applies to eligible purchases between £100 and £30,000.

Why BNPL matters for lenders and retailers

BNPL has become a mainstream checkout option, and regulation changes how providers and retailers must operate rather than whether the product exists. Affordability assessment — including the use of Open Banking and bureau data to confirm a customer can meet the instalments — is now central to offering BNPL responsibly. For retailers, offering a regulated, well-assessed BNPL option is about conversion without exposing customers to foreseeable harm.

BNPL and affordability data

Because BNPL decisions are made in seconds at checkout, the data behind them has to be fast as well as reliable. Combining bureau signals with Open Banking affordability lets providers make a responsible, defensible decision at the point of sale — approving customers who can sustainably afford the instalments while declining those for whom they would not be affordable, in line with the FCA's expectations for the sector.

Why BNPL grew so quickly

BNPL's rise was driven by a simple customer proposition — interest-free, frictionless spreading of cost at the exact moment of purchase — and by strong retailer incentives, since offering it tends to lift conversion and basket size. For customers it can be a sensible way to manage cash flow; the concern that prompted regulation was that the ease of use, repeated across many purchases and providers, could let some customers take on more short-term debt than they could comfortably manage, often without a full affordability check.

What regulation changes in practice

Bringing deferred payment credit into FCA regulation does not remove the product; it changes how it must be offered. Providers now have to assess affordability, communicate clearly, treat customers in difficulty fairly, and give access to the Financial Ombudsman Service. In practice this means BNPL decisioning has to do, at checkout speed, much of what other regulated lenders do at application — which places real weight on fast, reliable affordability data and on the ability to evidence each decision.

The role of data in responsible BNPL

The central challenge for regulated BNPL is making a sound affordability decision in the few seconds a checkout allows. That is where combining bureau signals with Open Banking affordability data matters: it lets a provider confirm, quickly and from real evidence, that a customer can sustainably meet the instalments. Done well, regulated BNPL keeps the speed and convenience customers value while ensuring the decision behind it would stand up to the FCA's expectations for the sector.