Buy Now, Pay Later (BNPL) has quickly become part of everyday shopping in the UK, offering a simple way to spread payments over a period of up to 12 months, without using a credit card. For many people, it feels quick, flexible, and easy to manage.
BNPL hasn’t been fully regulated in the same way as other types of borrowing, it has been possible for unregulated lenders to offer this type of finance and this has resulted in some people taking on debt without always having a clear sense of what they are agreeing to or whether they can comfortably afford the repayments. This has led to growing concern from consumer groups and regulators.
Now the Financial Conduct Authority (FCA) is stepping in to change the rules surrounding these types of finance. BNPL providers will soon fall under formal regulation, bringing them in line with other, long term lenders. Here’s what the FCA’s new rules mean, why they are being introduced, and how they could affect both shoppers and retailers in the UK.
What is Buy Now, Pay Later?
Buy Now, Pay Later (BNPL) is the common term for Deferred Payment Credit (DPC), which is a way of paying for things that lets you buy something straight away, but spread the cost over a series of smaller payments, up to 12 months, interest free. Instead of paying the full amount at once, you split the total into instalments that are usually taken weekly or monthly.
You have probably already seen these options at online checkouts, or sometimes sitting alongside card payments in shops. It is usually quick to set up and, in many cases, you only need to enter a few details before you can use it, rather than going through a full credit application.
A big reason it has become so popular is that BNPL services offer short term finance, up to 12 months and don’t charge interest if you pay the full balance on time, making it feel more manageable than other forms of borrowing without added interest costs. However, the rules aren’t the same with all providers, and you could still be charged a fee if you miss a payment and risk affecting your credit score.
The rise of this payment method in the UK
Buy Now, Pay Later has grown quickly in popularity across the UK in recent years, becoming a common way to pay both online and in-store.
Recent research shows just how widely it is being used, with just over half of UK adults (around 54%) having used it at least once. Usage is rising steadily from previous years, when it was closer to 2 in 5, showing how quickly it has become a mainstream payment method.
It is particularly popular amongst younger adults, although usage is now spreading more widely across different ages.
Percentage of BNPL users by generation
It has also become a part of regular spending habits for many users, with studies suggesting BNPL now makes up around 8% of all payments in the UK, and this is only expected to grow. Growth has been driven by how easy it is to access at checkout, especially online, along with the appeal of splitting payments without immediate interest charges.
How the FCA plans to bring Buy Now, Pay Later into regulation
The Financial Conduct Authority (FCA) has set out plans to bring Buy Now, Pay Later, also known as Deferred Payment Credit, into its regulatory framework from July 2026. This follows government legislation that gives the FCA responsibility for overseeing these products for the first time.
Under the new approach, BNPL agreements will be treated as regulated consumer credit when they involve a third-party lender and separate retailer to bring them into the same broader system used for other types of regulated lending in the UK.
The FCA has published final rules and guidance that explain how this transition will work, including how firms will move into the regulatory system before full supervision begins. The approach is designed to formally bring BNPL into its existing consumer credit regime, rather than creating a completely separate system.
What stronger affordability checks mean for everyday shoppers
Previously, applying for BNPL has been very quick, with only limited checks taking place in some cases.
However, one of the biggest changes to Buy Now, Pay Later under FCA regulation will be that stronger affordability checks will be introduced as part of the application process. These checks are designed to help lenders get a better understanding of whether someone can realistically afford to take on repayments before they are approved for credit.
Under the new rules, providers are expected to take a closer look at a customer’s financial situation before offering credit. For shoppers, this could mean:
- More questions during the application process: Some providers may ask for extra information about income, spending, or existing borrowing before they decide whether or not to approve someone.
- Longer approval times at checkout: Buy Now, Pay Later applications may no longer feel quite as instant as they do now, especially if additional checks are needed behind the scenes.
- A lower chance of borrowing beyond your means: The aim of affordability checks is to reduce the risk of people taking on repayments they may struggle to keep up with later.
- Different outcomes depending on financial circumstances: Some shoppers may be approved for smaller amounts than before, while others may no longer be approved at all if the repayments are deemed unaffordable.
- More consistency across lenders: Regulation is expected to create clearer standards for how providers assess affordability, rather than each company following different approaches.
- A closer link between Buy Now, Pay Later, and other forms of credit: As affordability checks become more detailed, BNPL may start to feel more similar to traditional borrowing products, rather than just another payment option at checkout.
Stronger FCA regulation could also help people see BNPL for what it really is: a form of borrowing. It can sometimes feel like a payment option rather than taking out credit, but the truth is that repayments still need to be managed, and smaller instalments that seemed affordable on their own can quickly add up when multiple purchases are spread across different retailers.
Clearer information and stronger affordability checks may encourage shoppers to think more carefully before agreeing to repayments and better understand the financial commitment involved. Over time, this could help people make more informed decisions about borrowing and reduce the risk of taking on debt that later becomes difficult to manage.
Key changes BNPL providers will need to make
From July 2026, providers offering regulated Buy Now, Pay Later products will need to be authorised by the Financial Conduct Authority, or have temporary permission, to continue operating in the UK. This brings them more in line with traditional lenders.
One of the biggest changes will be around how customers are approved for credit. Regulated providers will be expected to carry out stronger affordability checks to make sure that repayments are realistic and manageable for each individual. They will also need to explain the process more clearly, including how repayments work, when payments are due, and what could happen if someone misses a payment, to help make the borrowing process easier to understand from the start.
BNPL firms will also be expected to meet wider consumer protection standards under the FCA’s rules, including treating customers fairly, offering better support to people who are struggling financially and improving how complaints are handled. Providers will also face closer oversight from the FCA, with more reporting and monitoring going forward.
Be ready to embrace the changes to Buy Now, Pay Later
The FCA’s move to regulate Buy Now, Pay Later marks a major shift for a payment method that has grown rapidly across the UK in recent years. As the sector becomes more closely regulated, providers will need to adapt to higher standards around affordability, transparency, customer support, and ongoing oversight.
While these changes will bring extra responsibilities for BNPL firms, they are also likely to help build greater trust in the market over time. Clearer processes and stronger protections could give customers more confidence in how these products work and the financial commitments involved.
For providers, preparation will be important. Those that can successfully adapt to the new regulatory environment while continuing to offer a smooth customer experience are likely to be in a stronger position as the BNPL market continues to evolve.
At Medicred, we focus on clear, responsible healthcare finance options designed to help customers understand their repayments before applying.
FCA Buy Now Pay Later regulation FAQs
Will customers get more protection when using FCA-regulated Buy Now, Pay Later?
Customers using FCA-regulated Buy Now, Pay Later are expected to have stronger protection as the services come under official financial rules. Providers will need to follow clearer standards on how they explain products, check borrowing, and treat people fairly.
This brings BNPL in line with other types of regulated credit, helping to make rules more even across the market and close gaps in protection that have existed before.
There will also be clearer rules on what happens if things go wrong. This includes better ways to handle complaints and more help for customers who find repayments difficult.
What affordability checks might providers perform?
Affordability checks for Buy Now, Pay Later are likely to involve providers looking at whether a customer can realistically manage repayments, including reviewing basic financial information such as income, spending habits, and any existing borrowing agreements that a person has. The aim is to get a clearer picture of a person’s financial situation before approving credit, rather than relying only on a quick yes or no decision at checkout, as has often happened in the past.
Providers may also use credit checks or other forms of financial data to assess risk more carefully. This helps ensure lending decisions are based on individuals’ ability to make repayments.
How could the new rules affect retailers?
Retailers that offer Buy Now, Pay Later may see changes in how these payment options are integrated at checkout once FCA Buy Now Pay Later regulation rules take effect. The approval process could take longer in some cases, as providers introduce stronger checks before allowing customers to complete a purchase using instalments, which may slightly change the speed and simplicity that many retailers currently rely on when offering BNPL options online or in their stores.
Retailers may also need to work more closely with regulated providers to ensure their payment systems meet new standards. This could include updates to how information is shown and explained to customers.