The BNPL Boom: The Good, The Bad, and The Regulatory Challenge

In the summer of 2022, a young marketing executive in London, eager to revamp her wardrobe, clicked “Pay in 4” at checkout. The process was seamless—no credit check, no hassle, and most importantly, no immediate cash outflow. Fast forward six months, she found herself juggling payments across three different BNPL providers, struggling to keep up as late fees and missed payment penalties mounted.

Her story is not unique. BNPL has redefined consumer credit, offering frictionless financing at the point of sale. But beneath its convenience lies a pressing concern—are we enabling financial empowerment, or are we simply repackaging debt in a more palatable way?

The BNPL Phenomenon: Growth at Breakneck Speed

Globally, BNPL has reshaped consumer finance, particularly among millennials and Gen Z who are wary of traditional banking. The industry was valued at $231.51 billion in 2024 and is projected to reach $343.52 billion in 2025, reflecting a staggering CAGR of 48.4 percent (The Business Research Company, 2024).

Unlike credit cards, which require formal applications, credit checks, and regulatory oversight, BNPL bypasses these barriers, creating a gray zone in financial services. This frictionless credit model has led to exponential growth, with adoption rates surging across multiple economies.

BNPL Growth in Different Markets

• United Kingdom: 42 percent of UK consumers—around 22.6 million people—have used BNPL at some point (ThePaypers, 2024).
• India: Regulatory hurdles, including the Reserve Bank of India’s restrictions on unsecured digital lending, have slowed growth.
• United States: Regulatory uncertainty following leadership changes at the Consumer Financial Protection Bureau (CFPB) has left the BNPL sector at a crossroads.
• Australia and the European Union: Countries are imposing stricter lending rules, forcing BNPL providers to integrate responsible lending frameworks.

While these markets adopt BNPL at different paces, one question remains universal: how do we balance innovation with consumer protection?

The UK: A Love Affair with BNPL?

In the UK, BNPL is booming. A staggering 63 percent of millennials and 56 percent of Gen Z have used BNPL at least once (ThePaypers, 2024). Traditional credit cards are losing relevance, as younger generations prefer the flexibility of installment-based payments.

The Financial Conduct Authority has raised concerns about the lack of credit checks and affordability assessments. Despite BNPL’s rapid expansion, regulations will not take effect until 2026, creating a regulatory vacuum where millions of consumers remain vulnerable to debt spirals and late penalties.

Will the UK’s delayed regulation lead to unchecked lending and a financial reckoning, or will the market self-correct before intervention?

India: The Roadblock to Unchecked Lending

India's BNPL journey is one of ambition tempered by caution. Initially celebrated as a game-changer in financial inclusion, its growth was curtailed when the Reserve Bank of India imposed stricter lending guidelines.

• June 2022: RBI prohibited non-bank financial companies from offering BNPL-linked prepaid credit, effectively slowing down the sector (Norton Rose Fulbright, 2024).
• Regulatory Overhaul: RBI’s strict digital lending guidelines ensure that only regulated financial institutions can offer BNPL services.

For Indian fintech startups, this was a defining moment. Companies with strong financial backing pivoted toward regulated lending models, while smaller players struggled to adapt. The concern is whether India’s caution will protect consumers or stifle financial innovation.

As UPI-linked credit expands, BNPL may have to find its place alongside more structured digital lending products.

United States: Regulation in the Crosshairs

Across the Atlantic, BNPL is facing its most significant challenge yet.

Under former CFPB Director Rohit Chopra, regulators signaled a shift toward classifying BNPL providers as credit card issuers—meaning stricter consumer protection rules, dispute rights, and regulatory oversight.

But leadership changes have created uncertainty.

With $17.3 trillion in household debt (2024), U.S. regulators are worried about BNPL-induced debt accumulation. Studies show 69 percent of BNPL users also carry credit card debt, raising alarms about financial sustainability (Federal Reserve, 2024).

As new leadership reshapes the CFPB’s priorities, the fate of BNPL regulation remains unclear. Will regulators ease restrictions, or will scrutiny intensify?

The Global Regulatory Landscape: A Fragmented Approach

The BNPL regulatory landscape is fragmented, with some countries taking an aggressive stance while others wait and watch.

• Australia: The government is reclassifying BNPL as credit, enforcing affordability checks and regulatory oversight.
• European Union: Proposed BNPL rules require mandatory credit assessments and full consumer protections similar to loans.
• Singapore: Regulating BNPL under existing financial frameworks to curb predatory lending.

The question is how long can global markets sustain this fragmented approach?

The Future of BNPL: A Path Forward

BNPL is neither inherently good nor bad—it is a tool. The key is creating guardrails that balance innovation and consumer protection.

Solutions to Regulatory Challenges

• Mandatory creditworthiness checks to ensure consumers can afford repayments.
• Transparent disclosure of late fees, penalties, and total repayment costs.
• Real-time debt monitoring to prevent overextension across multiple BNPL providers.
• AI-powered risk models to assess consumer behavior and detect debt distress early.
• Regulatory harmonization across markets to prevent loopholes and arbitrage.

The challenge is not about regulating BNPL out of existence but ensuring BNPL providers operate with accountability.

A Reckoning or a Renaissance?

BNPL is at a crossroads. The next five years will determine whether it becomes a regulated, sustainable credit option or collapses under the weight of bad debt and consumer backlash.

For the young professional in London, BNPL started as a convenience but turned into a burden. Multiply her story by millions, and we see a systemic issue.

BNPL, in its current form, thrives on regulatory loopholes—but loopholes rarely last forever.

The question is: will BNPL providers adapt before regulators force their hand?

Conclusion: The Next Chapter for BNPL

The BNPL boom is not over—it is evolving. The industry must embrace trust, transparency, and responsible lending before regulators enforce sweeping restrictions.

If done right, BNPL can be a force for financial empowerment rather than a debt trap. The choice is ours.

What are your thoughts—should BNPL continue its rapid growth unchecked, or is it time for stricter controls before a financial bubble forms?