The customer who was always going to pay in full
Picture a regular customer with a £180 basket. They have the money and they were always going to pay for it today. But the first button they see at checkout says "Pay in 3", so that's what they tap.
The customer is happy, but the merchant has just paid one of the highest fees in its payment mix on a sale it didn't need help to close.
BNPL is a useful tool. It can lift conversion and basket size, especially for higher-value items and for customers who prefer to spread the cost. But it isn't free, and it isn't the right default for every purchase. This guide compares what UK merchants pay for BNPL, cards and Pay by Bank, and how to place each one so it earns its keep.
What BNPL costs merchants
With BNPL, the merchant usually pays the provider's fee, not the customer. Fena's earlier analysis of Klarna on Shopify UK put its instalment products at roughly 4.99% to 5.99% plus a fixed fee per transaction. Fees vary by provider, product and agreement, but BNPL generally costs merchants more than standard card processing.
The merchant is normally paid in full by the provider, which takes on the credit risk. That's the trade: a higher fee in exchange for conversion, basket size and no exposure to the customer's repayments.
What changed in July 2026
Since 15 July 2026, third-party BNPL lenders have been regulated by the FCA. They must run proportionate affordability checks before lending, give clearer information upfront, and support customers in difficulty.
For merchants, two practical effects are worth noting. First, checkout may change. Affordability checks can add a step, and approval rates may shift, so merchants should watch BNPL approval and completion rates closely. Second, merchant own credit is treated differently. BNPL offered by a third-party lender is now regulated, while interest-free credit offered directly by the merchant on its own goods remains exempt, under the government's 2024 decision. Merchants considering their own instalment schemes should take advice.
Where Pay by Bank fits
Pay by Bank lets the customer pay directly from their bank account through their banking app. The payment is authenticated by their own bank and settles over Faster Payments.
It makes most sense where the customer has the money and simply wants a quick, secure way to pay. Customers paying in full don't need credit, so there's no reason to pay credit-level fees. Returning customers who trust the brand are often happy to pay directly. And on larger orders, the difference between BNPL fees and Pay by Bank fees becomes significant in pounds, not just percentages.
Pay by Bank through Fena is typically priced at 0% to 1% per transaction. Funds arrive quickly, and because the customer authorises the payment with their own bank, there's no chargeback mechanism.
How to place both at checkout
The goal isn't to remove BNPL. It's to stop it being the default for customers who don't need it.
In practice, that usually means showing Pay by Bank prominently as a simple way to pay in full, alongside cards, and keeping BNPL clearly available for customers who want to spread the cost. Be careful with wording: present credit as an option, rather than nudging every customer towards it.
It's also worth measuring. Track what share of BNPL orders come from repeat customers or below a certain basket value. Those are often the sales where Pay by Bank could do the same job at a fraction of the cost.
For a worked example of the savings, see our guide on how to reduce Klarna fees on Shopify UK by adding Pay by Bank.
Reviewing your checkout
A few questions are worth asking. What share of revenue goes through BNPL, and what does it cost in total each year? How many BNPL customers are repeat buyers or have small baskets? Has your BNPL approval or completion rate changed since July 2026? Is a low-cost way to pay in full clearly visible at checkout? And is BNPL presented neutrally, without pushing customers towards credit?
How Fena helps
Fena is an FCA-regulated open banking provider. Merchants on Shopify, WooCommerce and custom checkouts use Fena to add Pay by Bank alongside cards and BNPL, with payments settled directly to their bank account. Payment links and QR codes cover phone, in-store and invoice sales too.
Common questions
Should I remove BNPL from my checkout?
Usually not. BNPL helps some customers and some baskets. The aim is to make sure customers who would pay in full have a cheaper, equally easy option.
Does Pay by Bank work on mobile?
Yes. On mobile, the customer is usually taken straight to their banking app to approve the payment, then returned to the checkout.
Do the new BNPL rules apply to merchants?
The rules apply to the BNPL lenders. Merchants are affected indirectly through changes at checkout, and merchant own credit has its own position. Take advice if you offer instalments directly.
Can customers get refunds with Pay by Bank?
Yes. Merchants can refund customers to their bank account. Customers keep their normal consumer rights.
Article by
Gosia Furmanik
CEO and Founder
Published on
