trending
The Financial Conduct Authority (FCA) has unveiled long-anticipated plans to bring Buy Now, Pay Later (BNPL) products under formal regulatory supervision from July 2026.
The move is set to introduce significant changes to how BNPL operates in the UK, bringing it in line with protections afforded to other consumer credit products.
BNPL Regulation
FCA sets out BNPL regulation roadmap
Under the proposals, BNPL lenders will be required to assess affordability before issuing loans and to offer tailored support to borrowers who fall into financial difficulty.
Borrowers will also gain the right to escalate complaints to the Financial Ombudsman Service – marking a critical expansion of consumer redress.
The FCA has opted for a light-touch approach, largely applying existing regulatory frameworks, such as the Consumer Duty, rather than introducing wholly new rules.
Sarah Pritchard, the FCA’s deputy chief executive, stated: “We want consumers to benefit from BNPL while being protected. By relying on existing frameworks, we support growth and innovation without compromising on safeguards.”
The regulator has opened a formal consultation on the rules, which will remain open until 26 September 2025.
In the interim, a Temporary Permissions Regime will be available two months before the rules take effect.
This will allow firms to continue operating while they seek full FCA authorisation, which must be obtained within six months of the July 2026 start date.
Surging BNPL
The incoming regulation arrives amid surging BNPL usage across the UK.
According to the FCA’s research, approximately 10.9 million adults – around 20% of the UK population – used a BNPL product between May 2023 and May 2024.
That figure is up markedly from 17% in 2022, underscoring the sector’s rapid expansion.
However, industry experts warn that regulatory compliance could introduce new operational burdens.
Hyder Jumabhoy, partner at White & Case LLP, noted that the changes will likely drive up compliance costs and erode margins, particularly for smaller players.
“This could catalyse a wave of consolidation, with larger firms or challenger banks acquiring BNPL providers to scale their consumer lending portfolios,” he said.
Richard Pinch, senior director at Broadstone, added that increased regulatory expectations – especially those linked to risk assessment and Article 75 protections – will demand more advanced credit analytics and monitoring systems.
“Smaller BNPL firms may struggle to meet these demands, making consolidation a probable outcome,” he observed.
After years of delay and debate, the UK’s regulatory grip on BNPL is finally tightening.
For consumers, it heralds a safer borrowing environment. For lenders, it’s a signal to adapt – or risk being left behind.
Comments