BNPL Is Regulated Now. Affordability Checks Just Became Part of the Checkout

For most of its life in the UK, buy now, pay later won on one thing above all: it was frictionless. No application form, no hard search, no waiting. A shopper chose "pay in 3" and was back on the confirmation page before they'd had time to think about it.

On 15 July 2026, that changed. Deferred payment credit became regulated by the FCA, and every third-party BNPL lender now has to be authorised, or operating under a temporary permission while it applies, and has to follow the FCA's rules. Those rules include proportionate creditworthiness and affordability checks before credit is given.

For lenders, that creates a tension at the checkout that the industry is still working through.

What actually changed

The FCA confirmed the regime in Policy Statement PS26/1 in February. Since July, BNPL lenders have had to give customers clear information upfront about payment dates, amounts and what happens if they miss a payment. They must support customers in financial difficulty and signpost free debt advice. They are subject to the Consumer Duty, and customers can take complaints to the Financial Ombudsman Service.

And before lending, they have to check that the customer can afford to repay.

The word the FCA keeps using is "proportionate". A £60 order split in three isn't a mortgage, and nobody expects it to be assessed like one. But proportionate still means something has to be checked, and the lender has to be able to show that it was.

The tension at the checkout

Here's the problem. A check that takes too long, or asks too much, loses the sale. Shoppers who were happy to pay in three will happily pay in full by card, or leave altogether, if the checkout suddenly feels like a loan application.

A check that's too light carries the opposite risk. It might keep conversion where it was, but it won't stand up if the FCA or the Ombudsman asks how the lender knew the customer could afford the plan.

The obvious response is to lean harder on credit reference data. It's familiar, it's fast and it's already wired in. But for BNPL in particular, it has real limits.

Why a credit file alone isn't enough for BNPL

BNPL plans are short. Most run over weeks, not years. Credit reference data can take weeks to reflect new borrowing, which means a customer's file may not yet show the plans they took out with other providers last month.

BNPL also skews towards younger customers, many of whom have thin credit files. A credit file can easily say "not enough information" about someone who is perfectly able to repay, and say nothing worrying about someone who is already juggling several plans.

Neither outcome is what the Consumer Duty is aiming for. Turning away people who can afford to repay is a poor outcome. So is lending to people who can't.

What a better check looks like

That's why we think lenders should look closely at open banking data.

With the customer's consent, an open banking connection can show what actually matters for a short-term plan: whether income arrives regularly, what regular commitments go out, what the balance looks like now, and whether the customer is already paying other BNPL providers. It comes directly from the bank, it's current rather than weeks old, and it takes the customer a few taps in their banking app, not a form.

Done well, it's faster than asking questions and more accurate than relying only on a file. It also gives the lender something concrete to point to if a decision is ever challenged.

The same connection can carry the repayment

There's a second reason to care. The bank connection a customer makes for an affordability check is the same kind of connection they can use to repay. A lender that brings open banking into its checkout for affordability is one step away from offering repayments by pay by bank, and, as Variable Recurring Payments open up to BNPL, from authorise-once instalments straight from the customer's bank account.

That turns a compliance cost into the foundation of a better product.

Where we fit

We've spent six years building open banking payments and data services for UK businesses. For BNPL lenders, that means consented account information for affordability checks, pay by bank for repayments and catch-up payments, and bulk payouts for refunds and merchant settlement, all from one FCA-regulated provider. You'll speak directly to the people who built it.

We won't pretend open banking makes a lender compliant on its own. But if your affordability check is currently a trade-off between losing customers and losing sleep, it's worth an hour to look at what better data could do.

To talk about BNPL affordability and repayments, email sales@fena.co.