What you need to know about BNPL regulations

From July 2026, new Buy Now, Pay Later (BNPL) regulations came into force in the UK. The changes bring BNPL under Financial Conduct Authority (FCA) regulation for the first time, introducing stronger consumer protections and new responsibilities for businesses that implement or use BNPL.

While much of the discussion has focused on protection for BNPL customers, the changes also have important implications for BNPL lenders, retailers who offer BNPL at checkout and fintechs launching their own BNPL products.

The new regime raises expectations around governance, oversight and compliance, making it more important than ever for businesses to understand their responsibilities and wider business risks.

What’s changed?

After years of consultation, the UK's new BNPL regime came into force on 15 July 2026, bringing BNPL — legally known as Deferred Payment Credit (DPC) — within the scope of FCA regulation for the first time.

DPC, aka BNPL, is an interest-free form of credit that’s repayable in up to 12 instalments over a period of up to 12 months. In the UK, statistics show that most consumers use BNPL for fashion and clothing, lifestyle products and consumer electronics, and it’s particularly popular among Millennials and Gen Z.

Before July 2026, BNPL lenders weren’t required to get FCA authorisation or comply with the same consumer credit rules as other lenders.

As a result, consumers could access credit without mandatory affordability assessments, had fewer avenues for complaint, weaker purchasing protections and less support if they experienced financial difficulty.

This made it easier for some customers to accumulate multiple credit agreements without fully understanding the overall level of debt they were taking on.

The reforms are designed to ensure consumers receive greater protection while bringing BNPL into line with other regulated forms of consumer credit.

Why should BNPL lenders, retailers care?

Beyond customers, the FCA regulations will affect two main business types: BNPL lenders and retailers. Here’s how:

BNPL lenders

The new FCA regime represents a significant shift for BNPL lenders from operating in an unregulated market to becoming part of the wider consumer credit framework.

BNPL lenders must now meet the standards expected of regulated consumer credit firms, including:

• Running affordability assessments
• Providing clearer customer information
• Implementing fair complaints and customer support processes

For many lenders, this will mean reviewing lending processes, customer journeys, internal controls and compliance frameworks to ensure they meet the FCA's expectations.

While these changes introduce added operational and compliance responsibilities, they also present an opportunity to strengthen customer confidence and demonstrate a commitment to responsible lending.

As regulatory expectations continue to evolve, BNPL lenders will need to ensure their operating models remain aligned with FCA requirements.

Alongside compliance, reviewing areas like governance, risk management and internal processes can help businesses build a stronger foundation as the market continues to mature.

Retailers

Businesses that offer BNPL at checkout aren't directly regulated as lenders. That said, they’ll still need to consider how the new regulation affects their relationships, both with BNPL lenders and their customers.

Choosing the right BNPL partner will no longer be purely a commercial decision. Instead, it'll increasingly be a reputational one. Retailers should review their existing partnerships to ensure they’re working with authorised BNPL lenders that meet the FCA’s requirements.

The customer journey may also change as lenders introduce affordability assessments and enhanced customer verification checks.

While this may create an additional step before buying, and some customers who previously used BNPL may no longer be eligible, the aim is to ensure customers only access credit they can afford and reduce the risk of unaffordable borrowing.

Retailers will also need to make sure that BNPL is clearly presented as a form of credit rather than simply a payment option.

Customer communications and marketing materials should be transparent, clear and informative, helping customers understand the terms of the agreement and reducing the risk of confusion around the use of BNPL.

These changes may have an impact on conversion rates in the short term, as some customers could no longer pass affordability checks. However, the increased transparency and stronger consumer protections are expected to support greater confidence in BNPL products over time.

By working with compliant lenders and offering a clearer customer experience, retailers can help build trust while continuing to offer the flexibility that makes BNPL attractive.

What all BNPL businesses should be doing now

There are several things all businesses using or working with BNPL should be doing, including:

• Review existing BNPL partnerships
• Ensure BNPL lenders are appropriately authorised
• Assess the impact on customer journeys and conversion rates
• Review commercial agreements
• Monitor customer complaints and feedback

As the market adapts, businesses should review how the regulations affect their customer journey, particularly where affordability checks, pre-contract disclosures and enhanced customer information may influence conversion rates.

Commercial agreements with BNPL lenders should also be reviewed to ensure responsibilities are clearly defined under the new regulatory framework.

What does this mean for your insurance?

As the BNPL market becomes more heavily regulated, businesses should also consider whether their insurance has evolved alongside their regulatory obligations.

The insurance needs of BNPL lenders, retailers and fintechs launching BNPL products will vary depending on their business model.

There are several policies businesses might want to consider, including:

• Professional indemnity insurance: If a third party accuses you of professional negligence, having professional indemnity insurance may help to cover any associated legal costs
• Cyber insurance: Cyber insurance is designed to cover any business which operates online or is exposed to the internet and the risks that come with storing and handling data when running a company
• Directors' and officers' insurance: Also known as management liability insurance, this helps protect entrepreneurs running businesses of any size from the associated risks of running a company. It’s common for investors interested in a company to make D&O insurance a must-have requirement
• Crime cover: Crime insurance can help protect businesses against financial losses caused by fraud, identity fraud, social engineering scams and employee dishonesty

For more on the evolving cyber threat landscape and how to mitigate your cyber risks, read our latest cyber risk report.

While insurance can’t replace effective governance or cover every regulatory consequence, reviewing your insurance alongside regulatory change can help you make sure your business is better protected as the market evolves.

Looking ahead

The regulation of BNPL marks an important milestone for the UK consumer credit market. While the new framework introduces additional responsibilities for lenders and changes for retailers, it’s expected to support a more transparent and sustainable BNPL market by strengthening customer protection and confidence.

For lenders, retailers and fintechs entering the market, the new rules present an opportunity to strengthen governance and build long-term confidence in BNPL.

As the market continues to evolve, businesses should continue to review their compliance, risk management and operating models to ensure they remain fit for purpose.

It will also be important to monitor the wider impact of the new regime.

While stronger affordability checks are intended to protect customers from taking on unaffordable debt, some concerns reduced access to mainstream credit for some borrowers could inadvertently increase demand for unregulated or illegal lending.

As regulation continues to evolve, now is a good time for businesses dealing with BNPL to review not only their compliance arrangements, but also whether their risk management and insurance remain fit for purpose.

Seeking specialist insurance advice could help high-growth tech businesses dealing with BNPL regulation understand the risks they face, identify potential gaps in cover and ensure their cover keeps pace with the changing regulatory landscape.