UK Government Follows Through On BNPL Regulation

The 'new' UK government has followed through with earlier plans to regulate 'Buy Now Pay Later' (BNPL) short term installment credit that had stalled under the previous government. The regulated version will be called 'deferred payment credit' (DPC). The regulations won't bite until mid-2026, but it's good to finally have certainty as to what is regulated (if not the fine detail yet). And merchants, fintech service providers and credit reference agencies can use the 12 month window to figure out ways for consumers to keep track of both their regulated DPC and unregulated BNPL instalment credit. I've already summarised the latest proposals for Keystone here for information purposes, and have added a few thoughts below to consider. If you need advice on the plans, please let me know. 

Given that BNPL agreements directly with a merchant will remain unregulated, there remains an opportunity for third party finance providers (whether FCA-authorised or not) to work with merchants on unregulated BNPL. Structuring the overall offering to remain unregulated will take care, however.

The proliferation of DPC/BNPL arrangements should prove a boon to 'open banking' or 'account information service' providers who can offer consumers visibility of all their obligations, whether directly or via device manufacturers, DPC lenders or even merchants themselves.

There's also a growing credit reference/assessment challenge as more consumers take on more instalment credit, whether regulated or not.

The government is right, in my view, to keep a weather eye on the unregulated BNPL market to see if intervention is required, before acting. Third party lenders who complain about an uneven playing field between should also consider that regulating merchant BNPL could hurt smaller merchants in favour of larger merchants who already possibly have the resources to offer better instalment options, let alone bear the burden of being FCA authorised (not to mention the strain on the FCA itself in taking on every merchant that wishes to offer BNPL/DPC!).