Bring on the BNPL regulation, but let’s get it right!

The rapid expansion of Buy Now Pay Later (BNPL) services has undeniably reshaped the consumer credit landscape, offering a flexible and accessible payment method that caters to diverse lifestyles. However, this growth has simultaneously brought into sharp focus the imperative for suitable regulation. While further regulation is welcome in the wake of the Consumer Credit Act review, it must strike a delicate balance to safeguard consumers without stifling innovation and the UK's competitiveness.

We mustn’t forget that BNPL serves as an inclusive payment method, empowering individuals to manage their finances by spreading payments in a way that suits their needs. This aspect of inclusivity, allowing consumers a wider choice in how they pay for goods and services, remains a vital requirement. The emotional connection consumers feel to BNPL, stemming from its ability to provide informed choice and accountability, is also a key factor in its enduring appeal.

However, the inherent lending essence of BNPL, despite its "payment method" perception, necessitates a strong focus on consumer protection. Government initiatives including introducing affordability checks and granting consumers the right to complain to the Financial Ombudsman from 2026, are significant steps towards improving perceptions of this newer form of borrowing. The new regulations will ensure a consistent standard across the industry, fostering greater consumer confidence and fairer access to refunds.

Regulation sweet spot

The challenge lies in ensuring regulation is proportionate. An overly stringent approach risks phasing out an important product in the market, hindering the very inclusivity that BNPL provides. 

In particular this could be an issue in the payments ecosystem where offering BNPL through orchestration might even potentially be considered as a form of credit broking which would require payment service providers and orchestrators to potentially enhance their regulatory permissions to include consumer credit activities, and be subject to additional onerous rules. 

The UK's National Payments Vision emphasises continued growth and innovation, and any regulatory framework must align with this. The balance required between managing innovation, suitability tailored to individual needs, and robust regulation is a complex tightrope walk. Companies like Ecommpay are already operating with a strong compliance and regulatory lens in our product design, recognising the need for emotionally empowering choices for consumers.

The maturing BNPL market now offers a diverse array of solutions, and for e-commerce merchants, the key is to collaborate with payment providers who can offer a comprehensive range of credit options. Solutions like Visa Instalments, which leverage existing card infrastructure and eliminate the need for additional credit checks, can significantly improve checkout performance, especially in high-value sectors such as travel and luxury goods. These instalment solutions, whether interest-free or low-cost, provide greater financial flexibility for customers.

Empowering payments and protecting customers

Ultimately, however, the future of BNPL lies in a nuanced approach to regulation. While the core emphasis must be on affordability, transparent reporting to credit reference bureaus, and recognising vulnerability in consumers who might overextend themselves, this must not come at the expense of choice and innovation or restricting merchants’ ability to offer payment methods that customers have come to use and trust. 

The goal is to cultivate an environment where BNPL continues to be an inclusive and empowering payment method, while simultaneously ensuring robust consumer protection and maintaining the UK’s competitive edge in the global payments ecosystem. Payment providers, by staying abreast of the evolving regulatory landscape and offering diverse, compliant solutions, will be instrumental in achieving this delicate balance.