Significant changes are underway in BNPL (Buy Now Pay Later) regulation, as the sector falls directly under the supervision of the UK’s Financial Conduct Authority (FCA) from 15 July 2026.
Under the new regulations, lenders will need to be FCA-authorised to offer BNPL payments. Lenders will have to run affordability checks for every purchase, even for small payments of less than £50, and must notify consumers immediately if they miss a repayment. Items costing more than £100 but less than £30,000 fall under Section 75 protection, meaning the BNPL lender is jointly liable with the merchant if anything goes wrong – however, this only applies to BNPL agreements that are made after 15 July 2026.
Consumers will also be able to escalate any complaints to the Financial Ombudsman, meaning they should find it easier to receive a refund, if entitled to one.
Why it’s changing
Previously unregulated and with few affordability checks, BNPL has led many consumers to take out multiple agreements, with 41% of users struggling to make a repayment, according to research by Fair4AllFinance. MoneySavingExpert’s Martin Lewis was among those who campaigned for the “explosive” BNPL market to be regulated, particularly as ongoing cost-of-living pressures have seen consumers use BNPL for grocery shopping and day-to-day spending rather than the one-off payments for which it was originally envisaged.
However, commenting on the changes, Santosh “San” Nakra-Sah, co-founder and MD of specialist financial services consultancy and marketing agency ChilliMint, warned that there could be unintended consequences. “Fair4All Finance estimates the stricter affordability checks could exclude 10-30% of current users from BNPL altogether. That need for quick, flexible credit doesn’t evaporate just because access tightens – it goes looking for a new front door, and people don’t always choose a safer one once theirs closes,” she said.
“I see stronger regulation as a genuinely positive step, but the debate feels incomplete. Demand for short-term credit won’t disappear when BNPL becomes harder to access, so are we solving the problem, or just moving it somewhere less visible? As the market evolves, are we paying enough attention to the consumers who may end up caught in the middle?”
What the changes mean for online retail
While the main obligation for compliance remains with the lender, the new legislation affects merchants, too. Marketing content that could qualify as a financial promotion – for example, ‘spread the cost’ or ‘pay £30 now and the rest later’ – will often need to be approved by an appropriate authorising firm, and must be fair, clear and not misleading.
Affordability checks may also carry an extra layer of additional customer information, such as providing a date or birth or address confirmation. Retailers need to ensure online checkouts are prepared for this, so that consumers do not encounter extra friction at the point of purchase.
As BNPL has become a preferred payment method for big-ticket items, retailers should monitor the impact of these changes on conversion and average cost per basket. Lower conversion rates may indicate a need to diversify payment options, including longer-term regulated finance products, instalment plans, and digital wallets.
The new regime is intended to bring greater consumer protection and confidence to a rapidly growing payment method. For retailers, however, the challenge will be balancing compliance with a smooth customer experience. As affordability checks become more rigorous and some consumers lose access to BNPL altogether, retailers will be watching closely to see whether the benefits of increased trust outweigh any impact on conversion rates and sales.
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