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Buy Now Pay Later Finally Becomes Regulated Credit in the UK

  • 9 hours ago
  • 2 min read

The HM Treasury already published a draft legislation, removing the exemption for short-term interest-free credit, placing BNPL under full consumer credit style supervision. and under the Consumer Duty framework.


BNPL providers will have to demonstrate that they carry out proportionate affordability assessments before granting credit, provide clear and upfront information about payment amounts, due dates, total repayment, and the consequences of missed payments.


Third-party providers will need authorisation, but a temporary permissions regime in 2026 must probably will allow existing firms to continue operating during their application process. Even though earlier government decisions could keep some merchant-owned credit exempt, the overall direction of the regulators is now to move what once operated at the edges of regulation firmly into supervised territory.


Regulators and financial institutions assess BNPL differently from companies. And this creates pressure across multiple areas of the business.


Product teams must redesign customer journeys so that disclosures, repayment explanations, and affordability questions are clear and prominent without materially reducing conversion.


Compliance and legal functions must monitor whether communications remain fair, not misleading, and suitable for the target market.


Technology teams must integrate affordability data sources, repayment monitoring systems, complaints management processes, and reporting controls into existing platforms that were originally designed for speed rather than regulated credit supervision.


Once a product becomes regulated credit, firms must continuously monitor repayment performance, identify customers showing signs of financial difficulty, and apply appropriate forbearance measures where necessary. This significantly increases servicing complexity because customer support functions, collections teams, operational reporting, and governance frameworks all become more important to day to day business performance.


This is also why education in payments, banking, and financial regulation becomes increasingly important for companies adopting fintech solutions. Many organisations successfully implement innovative payment products from a commercial or technical perspective but underestimate the regulatory, operational, and financial responsibilities attached to them.


Without a Chief Payment Officer, BNPL can quickly become a slippery slope of missed opportunities to turn compliance into a genuine competitive advantage - making this role more valuable than ever.


 
 
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