Buy Now, Pay Later (BNPL) has quickly become a retail staple in the UK. With consumers increasingly seeking flexible payment options, BNPL services have surged in popularity, promising an easy way to split payments into bite-sized chunks. But with this growth
comes a growing wave of regulatory attention around rising default levels and consumer protection. In the UK, new regulations set to take effect in 2026 will require BNPL providers to carry
out mandatory affordability checks and improve transparency for consumers.
Here's the thing: while the regulations will introduce some changes they are unlikely to slow down BNPL’s momentum. For merchants, the decision to continue offering BNPL remains a no-brainer. Even in the face of stricter oversight, the core benefits of BNPL
such as increased order values, higher conversion rates, and shifted repayment risk, are too valuable to overlook.
UK BNPL regulation: Necessary, but not a dealbreaker
The new UK BNPL regulations require providers to carry out mandatory affordability checks on all customers, including those borrowing as little as £50. This shift marks a move away from the self-regulatory approach that has previously dominated the BNPL
market and reflects growing concerns about consumers falling into unmanageable debt. These reforms are designed to ensure greater transparency, safeguard financial well-being, and promote responsible lending.
However, while these changes are important, they are unlikely to significantly disrupt the BNPL ecosystem. A major reason for this is that the vast majority of BNPL users are already familiar with the process and have already undergone the necessary checks
when setting up their accounts. For these consumers, the new regulations won’t introduce significant additional friction.
The Financial Conduct Authority (FCA) reports that approximately
11 million adults in the UK used BNPL services in the year leading up to May 2024, which amounts to roughly one in five UK shoppers. Klarna alone boasts over
11 million active UK customers. Among these, repeat users are a significant portion. Klarna’s data shows that roughly
70% of its UK customers make repeat purchases within the year, which means most of these users have already completed the affordability checks when they first signed up.
Merchant risks and impacts: A small hiccup for big gains
For merchants, the primary draw of BNPL has always been its ability to drive up average order values and boost conversion rates. By offering a low friction checkout flow, BNPL reduces cart abandonment and encourages shoppers to spend more. Perhaps most importantly,
it shifts repayment risk onto the BNPL provider, not the retailer.
However, mandatory affordability checks threaten two of these advantages. First, the time it takes to verify a new user could slow down the checkout process, leading to a drop in BNPL uptake. Second, if conversion rates fall, the 2-6% processing fee that
BNPL providers charge might become harder to justify. So, is BNPL still worth it for merchants?
The key to answering that question lies in scale. Over two-thirds of BNPL attempts will continue to sail through the checkout without a hitch. That means the benefits of higher order values and increased conversion rates will still outweigh the minor friction
created for new users. For merchants, the risk of a slowdown is manageable, especially when the vast majority of transactions are unaffected.
Proof from regulated markets: BNPL thrives under scrutiny
Turkey offers a powerful example of what happens when BNPL regulation is introduced and adoption accelerates.
In 2022, Turkish regulators implemented stricter affordability rules for credit-based instalment payments, including caps on certain categories and clearer lending conditions. The move was designed to curb overspending and improve consumer protections. But
rather than cooling demand, the market continued to grow.
According to our internal data, credit card instalment transactions in Turkey increased from 181 million in 2020 to a projected 326 million by 2024. Over the same period, the total value of those transactions more than doubled, rising from $33 billion to
$83 billion.
BNPL Growth Under Regulation, Turkey’s Credit Instalment Surge (2020-2024)
Source: PSE Consulting
This success hinges on how the rules were implemented. Most instalments in Turkey run through established credit card infrastructure. For repeat users, the checkout process remains fast and familiar, even with regulation working in the background. That means
compliance doesn't come at the cost of convenience, a critical balance for both consumers and merchants.
Brazil presents a similar picture. With a regulated, card-based BNPL model in place for decades, it continues to see strong uptake. In both countries, regulation hasn’t killed BNPL, it’s helped formalise and scale it.
The lesson for UK merchants? Smart regulation doesn’t have to stifle growth. When BNPL is integrated into trusted payment systems and designed for repeat use, it can thrive, even under a stricter rulebook.
What does this mean for merchants?
For merchants, the big question is whether regulation will reduce the attractiveness of BNPL at checkout. The answer? Probably not. Most BNPL customers are already pre-approved by their provider, meaning they won’t face any delays when making purchases.
As long as the desire for flexible payments remains strong, merchants have every incentive to continue offering BNPL.
In fact, the only real change might be in the delivery of the service. For the overwhelming majority of shoppers, BNPL will continue to feel as effortless as it always has. The regulations will introduce some necessary checks and balances, but they won’t
fundamentally alter the BNPL experience for most consumers.