Buy Now, Pay Later (BNPL) has expanded exponentially across the past decade in a regulatory grey zone. It gave consumers a simple, low-friction way to spread payments, while helping merchants increase basket size, improve checkout conversion and support demand during periods of tighter household budgets. That combination made BNPL one of the fastest-growing segments in consumer credit.

By 2024, BNPL accounted for more than £13 billion of UK lending, and the FCA’s Financial Lives Survey found that 20% of UK adults – around 10.9 million people – had used BNPL in the previous 12 months. Usage has been particularly concentrated among younger adults, consumers with lower financial resilience and those living in more economically pressured communities.

As adoption has widened, regulatory attention is now sharpening.

What is changing in the UK?

From mid-July 2026, the UK’s new framework will bring third-party BNPL into formal consumer credit regulation as Deferred Payment Credit (DPC), meaning lenders need FCA authorisation or temporary permission to continue operating. For providers, this is not simply a perimeter change. It is a structural shift in how BNPL must be designed, marketed, underwritten, serviced and collected.

For lenders, merchants and collections teams, that matters. Business models built around speed and simplicity will now have to operate within a more transparent and accountable framework — one where consumer protection, fair treatment and good customer outcomes are not supporting features, but core expectations.

BNPL activity will be subject to the standards that already shape other forms of consumer lending. In practical terms, firms should expect increased focus on several areas:

• First, creditworthiness and affordability assessments will become a more visible and consistent part of the customer journey. While checks are expected to be proportionate, the direction is clear: firms will need to demonstrate that lending decisions are responsible, not simply convenient.
• Second, pre-contract disclosure will come under greater scrutiny. Customers will need clearer information on repayment terms, missed payment consequences and withdrawal rights, reducing the scope for BNPL to be presented as a near-invisible payment feature at checkout.
• Third, the expectations around customers in financial difficulty will rise. Firms will need to offer structured support, including appropriate signposting to free debt advice, and ensure that collections activity reflects regulatory expectations on fair treatment and consumer outcomes.
• Fourth, complaints handling and dispute resolution will become more formalised, including recourse to the Financial Ombudsman Service.
• Finally, marketing will need to be treated with much greater care. Messaging in banners, emails, checkout journeys and influencer-led campaigns will no longer sit outside the regulatory spotlight. Firms will need to ensure that promotional content is clear, fair and not misleading.

Taken together, these changes signal that BNPL will no longer be treated as an exception. It will be treated as credit.

Impact on Retail: Sales Approach and Conversion

It would be easy to see the UK reforms as primarily a legal or regulatory issue. In reality, they go much further than that.

BNPL’s appeal to retailers has always been straightforward: it increases basket sizes, lifts conversion rates, and effectively subsidises customer purchasing power at the point of sale.

That commercial logic does not disappear under the new rules — but it does get complicated.

The introduction of mandatory affordability is likely to reduce impulse uptake as checks introduce friction into what was previously a near-instant ‘one-click’ approval process.

For low-value purchases where margins are thin and impulsive purchasing behaviour is commercially valuable, even a modest delay or decline in approval rates has significant revenue implications.

Some retailers, particularly in fashion and lifestyle — the sector that accounts for the heaviest BNPL use — will see a measurable reduction in BNPL take-up at checkout.

Analyst estimates for BNPL volume reductions in regulated markets range between 10% and 20% in the near term, as higher-risk customer segments are declined credit they would previously have accessed freely.

However, the medium-term picture may be more nuanced.

Retailers who integrate compliant BNPL seamlessly, ensuring rejected customers are offered smooth alternative payment routes, can most likely minimise abandonment — and indeed the longer-term impact is not necessarily negative.

Regulation is likely to strengthen consumer trust and reduce reputational risk, supporting more sustainable use of BNPL across mainstream retail categories.

As larger merchants refine their user experience and streamline provider options, BNPL may become more seamlessly integrated but less overtly promoted.

This shift could position it as a more routine budgeting tool — primarily for still non-essential purchases — placing it closer to everyday consumer decision-making while also increasing awareness of, and concern about, the risk of rapid and unnecessary debt accumulation.

Credit Granting: Tighter Standards, Higher Costs

Creditworthiness assessments are where the initial operational burden falls most heavily on BNPL providers and therefore retailers.

Under the new UK framework, providers must gather sufficient information about a consumer’s financial position before extending credit — a materially higher bar than the soft credit checks most BNPL providers have historically relied upon.

That is likely to reduce approval rates at the margin, particularly for repeat borrowing, customers with thin files, or consumers already showing stress indicators — a key demographic of BNPL lending.

Meeting this standard at scale requires real-time data integration with credit reference agencies and income verification systems.

The infrastructure investment is considerable, and the cost will inevitably find its way into the economics of the product.

Retailers who have built their businesses on the explosion of zero-cost credit at the point of sale may face pressure on merchant discount rates as compliance costs are absorbed across the value chain.

One potential silver lining is that these changes may accelerate the use of richer data, bank-account information, and alternative indicators to make decisions quickly enough for rapid checkout while still meeting regulatory standards.

In practice, BNPL will look more like a streamlined credit product than a simple POS payment method.

Provider Landscape: Alignment to the High bar

Smaller, newer entrants face the greatest risk.

Larger established players like Klarna and Clearpay have the balance sheets and compliance infrastructures to adapt to the new authorised regimes.

Additionally, mainstream lenders and pre-existing regulated retail finance firms see this as a levelling of the playing field and an opening of new routes-to-market, with the new requirements fully aligning to their already mature risk, compliance and operating models.

With higher barriers to remaining in the market, we should not rule out a degree of market consolidation as regulatory costs of entry, route-to-market growth and legacy scale seek to find a way to co-exist.

Credit Risk and Collections: The Industry’s New Frontier

For the collections community, the new regulation creates both obligations and opportunities.

Better screening should reduce early delinquency as portfolio quality improves, yet stricter oversight also means firms must evidence their controls, monitor risk more actively, and align with broader conduct expectations.

Better data from mandatory credit checks and reporting will improve risk models.

Declining portfolios of historically high-risk borrowers who are no longer eligible for BNPL will reduce default exposure, but that is only the start.

Collections strategies built on historic repayment behaviour will not be sufficient — BNPL is different, and service teams need to reengineer collections strategies with nuanced intelligence around purchase and repayment behaviours of BNPL users.

Providers and servicers must now build collections frameworks that:

• Recognise vulnerability
• Offer structured repayment arrangements
• Avoid practices that exacerbate distress

As a BNPL collections provider, firms should consider:

• How will regulated BNPL impact arrears risk segmentation and engagement strategies?
• Do existing collections journeys stand up to regulatory scrutiny and evidence affordability and fair outcomes?
• How are the additional costs of regulatory adherence and oversight being addressed — internally or with trusted partners?
• What tools can be deployed to create efficiency and productivity within a heightened regulatory framework?

The transition period, as providers build credit insights, widen collections capability, train agents, and implement forbearance workflows, creates real operational risk.

Firms that underestimate this challenge may find their new regulatory obligations creating exactly the consumer harm the rules were designed to prevent.

A Broader European Trend is also Taking Shape

While the immediate focus for UK firms will be on domestic regulation, the wider European picture should not be ignored.

The Second Consumer Credit Directive (CCD2) will apply across the EU from November 2026, bringing BNPL, interest-free instalment products and some previously exempt lower-value credit arrangements into the consumer credit framework.

In effect, CCD2 closes many of the gaps that allowed BNPL to sit outside mainstream regulation.

The detail will vary by member state, and local interpretation will matter.

But the broader message is consistent: across Europe, policymakers are moving to treat BNPL as a regulated credit product rather than a special case.

That matters for firms with:

• Cross-border operations
• Multinational merchant relationships
• Shared servicing models

Even where the UK and EU frameworks are not identical, they point in a similar direction — toward stronger creditworthiness expectations, more transparent disclosures and greater scrutiny of customer outcomes.

The Global Ripple

The UK and EU are not acting in isolation. Australia has already moved to regulate BNPL through its consumer-credit framework, showing that other major BNPL markets are converging on proportionate and aligned oversight rather than exemption. Canada, Singapore and South Africa are all at varying stages of BNPL-specific consultation or guidance.

The United States remains the most fragmented, with a patchwork of state-level rules and federal agency interest (some might say indirect pressure) from the Consumer Financial Protection Bureau (CFPB), pushing BNPL closer to traditional credit-card style treatment in some areas, though the political environment makes sweeping federal action less certain.

The UK and EU frameworks are likely to serve as reference points across many global markets, not least because they are the product of years of market consultation and are being implemented by regulators whose existing models form the basis of many countries own emerging regulation.

What Should Firms be Doing Now?

The regulatory deadlines may still feel some distance away, but the operational lead time is much shorter. Firms that wait for the final moment will find that many of the hardest changes are not legal — they are organisational.

There are several priorities that firms should already be addressing:

• Review whether the existing customer journey still works in a more regulated environment. If the proposition depends on low-visibility disclosures or minimal friction, it may need redesign.

• Test whether creditworthiness and affordability processes are sufficiently robust, proportionate and explainable.

• Assess whether collections and customer support teams are equipped for a regime shaped by Consumer Duty, vulnerability expectations and stronger complaints rights.

• Revisit marketing and promotional activity to ensure that customer communications can withstand financial promotion scrutiny.

• Strengthen the data, MI and governance framework needed to evidence good customer outcomes across the end-to-end BNPL lifecycle.

In short, firms need to act now and prepare for regulation not as a one-off compliance project, but as a broader transformation in product governance and customer management.

Preparing for a New Normal

The era of unregulated BNPL is ending. The move to regulation reflects a more mature market reality: when a product becomes mainstream, expectations rise around transparency, affordability and customer protection. For BNPL providers, retailers and collections leaders, the challenge is no longer whether the model can grow quickly. It is whether it can grow responsibly and sustainably under closer supervision.

For an industry built on the promise of frictionless finance, that is a significant adjustment. BNPL’s next phase is less about rapid expansion and more about becoming a normalised part of the credit system. For consumer health, and for the long-term health of the sector, it is long overdue.

Concentrix – A Global Collections Partner

Concentrix Collections is a Global Specialised Service Line within the Concentrix Group. We operate as a dedicated Collections Practice with a mission to assist our clients develop best in class debt recovery operations through AI led technology, specialist data & analytics and globally efficient operations, with scale & performance.

We work with clients and partners to solve challenges across the Collections eco-system —find out how Concentrix Collections can assist you with meeting the challenges of BNPL.