BNPL regulation is proof that industry and regulators can work together successfully
It’s often argued that government regulation can hamper innovation, growth and competition. However, new regulations on Buy Now, Pay Later (BNPL), which come into force today, demonstrate that government, regulators and industry can successfully collaborate to improve consumer outcomes, while also supporting retail and tech sectors.
Since Clearpay launched in the UK in 2019, we’ve always prioritised consumer protection by capping late fees and pausing accounts if a single payment is missed. As BNPL became an everyday payment method for millions, it became clear that these protections were needed sector-wide.
Following Treasury and Financial Conduct Authority consultations with industry, all BNPL users will now also benefit from affordability checks, access to the Financial Ombudsman Service and Section 75 cover.
As of today these protections are now standardised, paving the way for further innovation and reaffirming the UK’s stake as a global fintech leader. It’s clear that BNPL has contributed to the growth of the UK economy; in 2024 alone, it enabled an additional £6.6bn of sales revenue for UK merchants. We expect regulation to boost consumer confidence further; our data shows that nearly half (48 per cent) of Brits say that the ability to complain to an independent body if something goes wrong will make them feel more confident when using this service.
Having spent years working with fellow industry leaders, government and the regulator to shape these rules, the process has highlighted one of the many strengths of the financial services industry: its ability to unite on driving change for the greater good.
Doing right by customers
Clearpay has always had honest conversations about what delivers the best outcome for consumers. While we have rich data from our daily customer engagements, we’ve always listened to consumer groups. Ongoing discussions with debt advice specialists like StepChange provided valuable insights that helped inform our approach to the BNPL policy framework, and to enhance our product to ensure it continues to meet customer’s needs, especially those who are vulnerable. Our shared commitment to doing right by customers guided cross-sector collaboration to align on measures that could deliver the right level of protection, while maintaining the flexibility that many customers value.
Providing robust data to the Government and FCA to demonstrate that consumers can achieve good outcomes on BNPL products – particularly given the industry-leading safeguards already embedded within our business model – helped us to advocate for a proportionate regulatory framework aligned with the actual risks associated with this type of credit.
In fact, with 96 per cent of instalments globally being paid on time, our internal data shows that customers are using BNPL responsibly. Our consumer research also highlights that more than a third (35 per cent) of customers use BNPL to help manage their budget and almost a quarter (23 per cent) say it helps them spend responsibly. From a merchant perspective, they benefit from attracting new customers and retaining existing ones when they offer our BNPL service at checkout.
In my experience, one of the most positive outcomes of this successful regulatory process has been that government and industry have worked together to regulate for the future. BNPL has been the greatest shake-up to consumer credit in the last 50 years, and how consumers spend money now is vastly different to the trends legislated for in the 70s.
As we look forward, BNPL has also paved the way for wider reform of the Consumer Credit Act, with a shift from prescriptive rules to flexibility that delivers good customer outcomes. This is encouraging and will help the UK retain its edge as a thriving market for fintech that delivers on choice, innovation and inclusion.
Ultimately, a willingness to implement a dynamic, future-proof regulatory framework is good for consumers, good for businesses, and good for the UK economy.
Iana Vidal is head of UK public policy at Clearpay