The Payment Expert Podcast discusses the recent buy-now-pay-later (BNPL) regulations in the UK, the potential impact and what this means for major players as they evolve into digital banks.
On 15 July, the UK introduced its first regulatory framework for the oversight of buy-now-pay-later (BNPL) and new consumer protections when using instalment-based payments.
In the latest episode of the Payment Expert Podcast, host Louis Thompsett is joined by Senior Business Journalist Kieran O’Connor to discuss how the UK’s BNPL is set to evolve now regulations are in effect and how it differs from other countries’ handling of BNPL.
In February 2026, the Financial Conduct Authority (FCA) announced the UK BNPL framework to oversee what has typically been regarded as unregulated credit. The rules focus on mitigating consumer affordability concerns, ensuring those who take out short-term credit, typically over 3 months, can pay off their debts.
As BNPL has become one of the most popular payment methods in the UK post-Covid, calls for regulation have lasted throughout several Prime Minister reigns.
Thompsett quizzed O’Connor on whether the regulations should have been introduced much sooner, but he said the FCA was able to analyse the market in a way which enabled the regulator to understand what BNPL is and what it means for consumer safety.
“It definitely could have been regulated earlier,” said O’Connor. “But, I think – and I don’t know whether this is the reason – because the FCA have allowed the market to mature, they have also allowed themselves enough time to understand the market and not rush into it.
“We have seen other markets that have come in and been in such a panic to make sure that consumers are protected, that they have brushed over what BNPL is and how it actually works.”
The US has had a turbulent time governing BNPL, from calls to regulate it the same as traditional credit cards, to the Consumer Financial Protection Bureau (CFPB) not prioritising BNPL regulations last year.
However, the US has provided a market for some of the sector’s major players, particularly Klarna, in being able to grow from its BNPL origins and diversify its offerings to new customer segments.
BNPL providers shifting to banking
Thompsett and O’Connor highlighted the shift in business strategy from Klarna to now offering digital wallets, payments and digital banking services ahead of applying for a US banking licence in July 2026.
O’Connor believes Klarna could continue this trend by possibly acquiring smaller BNPL providers, as well as other digital payment providers, when it pertains to the regulatory costs that come with complying with the new UK rules.
Both Thompsett and O’Connor pondered whether regulation would deter BNPL providers from operating in the UK, and why they may prefer the US market which currently has less stringent rules.
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