BNPL regulation is coming. Firms must prove they understand their customers

On the 15^th July 2026, Buy Now Pay Later (BNPL) products will formally move inside the FCA’s regulatory perimeter. After years of operating at pace in a lightly regulated environment, Deferred Payment Credit, more commonly known as BNPL, will become fully regulated consumer credit under FCA supervision.

This change has been some time in the making. The market has grown rapidly, with around one in five UK adults now using BNPL, often attracted by its frictionless nature and interest free positioning. But the FCA has been clear that growth, convenience and innovation cannot come at the expense of consumer outcomes. From regulation day, BNPL firms will be expected to meet the same standards as other consumer credit providers, including full compliance with the Consumer Duty.

For many firms, the challenge will not be understanding the rules. It will be proving, through assurance and evidence, that their lending practices are genuinely fit for the consumers they serve.

Consumer Duty and BNPL. Outcomes over intent

The application of the Consumer Duty to BNPL is a fundamental shift. It places the focus squarely on outcomes, not intentions or disclosures. Firms must be able to demonstrate that their products deliver good outcomes across the four Consumer Duty pillars. Product design, price and value, consumer understanding, and consumer support.

BNPL journeys have historically been optimised for speed and ease at the point of purchase. From July 2026, firms will need to show that customers genuinely understand what they are signing up to, not simply that information was presented. This includes clarity on repayment schedules, the consequences of missed payments, and how BNPL fits into a consumer’s wider financial position.

Affordability and creditworthiness assessments will be required on every transaction, even at low values, and firms must be able to evidence that these assessments are proportionate, repeatable and effective.

Vulnerable customers are at the centre of regulatory concern

One of the FCA’s strongest drivers for regulating BNPL has been its impact on vulnerable consumers. Research consistently shows that BNPL users are disproportionally younger, carry higher levels of unsecured debt, and are more likely to experience financial difficulty than the general population.

Vulnerability in BNPL is not always visible. It can be temporary or situational, driven by cost of living pressures, income volatility or repeated low value borrowing that quickly accumulates. Firms can no longer rely on the perceived small size of transactions as a mitigation.

From regulation day, BNPL providers will need to demonstrate that they can identify vulnerability, respond appropriately, and adapt their customer journeys and collections approaches accordingly. This includes how missed payments are handled, how forbearance is offered, and how customers are supported without unnecessary escalation or harm.

Assurance is critical but culture matters just as much

Regulatory scrutiny of BNPL will be intense in the early stages of the regime. The FCA has been explicit that it expects firms to be ready from day one, whether operating under full authorisation or the Temporary Permissions Regime.

Assurance activity will play a central role in demonstrating readiness. This includes:

• Reviewing affordability and creditworthiness models in practice, not just in policy
• Testing customer communications and understanding at key decision points
• Assessing vulnerability identification and treatment across the full customer lifecycle
• Reviewing governance, MI and escalation processes to ensure emerging risks are visible and acted upon

However, assurance alone is not enough. Firms must also examine their culture, training and decision making. Teams need a deep understanding of the nuances of consumers using BNPL, how behaviours differ from traditional credit products, and where harm can arise quickly if controls are not effective. Without this, assurance risks becoming a retrospective exercise rather than a preventative one.

Moving beyond compliance towards sustainable outcomes

As BNPL enters regulation, the key question for firms is not whether they can meet the minimum requirements on day one, but whether their operating model is genuinely aligned to the consumers using these products.

The FCA’s focus on Consumer Duty and vulnerable customers makes clear that intent, disclosures and isolated controls will not be enough. Firms will need to understand how their products behave in the real world, how consumers engage with them over time, and where harm can emerge despite apparently low-risk transactions. This requires a deeper examination of affordability, customer understanding, behavioural patterns and the cultural drivers behind decision making.

Independent assurance has an important role to play, not simply as a regulatory defence, but as a means of testing whether frameworks, governance and frontline practices are delivering the outcomes firms expect. Equally, building capability across teams, from product design through to collections and support, will be critical in ensuring that vulnerability is identified early and addressed consistently.

From our experience across consumer credit and conduct risk, firms that take this reflective approach early are better positioned to adapt under scrutiny. BNPL regulation marks a transition for the sector, from innovation at pace to accountability at scale. Those that treat it as an opportunity to strengthen understanding, culture and outcomes will be best placed to operate sustainably in the years ahead.