The checkout gets the attention. The repayments pay the bills.
Buy now, pay later is usually discussed as a checkout product. It is judged on approval rates, conversion and how quickly a shopper gets from basket to confirmation. But for the lender, the checkout is only the start. The business depends on what happens over the following weeks, when each instalment has to be collected on time and at a reasonable cost.
That matters more than it sounds. Each instalment is a fraction of an already modest purchase, so the cost of collecting it, and the cost of a failed attempt, takes a real share of the margin. Across a large book of plans, repayment collection becomes one of the biggest operational levers a BNPL provider has.
This guide looks at how BNPL repayments are collected today, where the usual methods leak, and what open banking changes.
How BNPL repayments are collected today
The most common model is simple. The customer adds a debit card when they take out the plan, and the lender charges that card on each due date, under a continuous payment authority. It works because it adds no extra step for the customer. But it means every instalment depends on a card that was chosen in a few seconds at checkout and may not be the right one weeks later.
Some providers and longer-term plans use Direct Debit. It is cheaper than card payments and widely trusted, but it needs bank details and a mandate set up in advance, takes several working days to clear, and is less suited to short, fast-moving plans.
Alongside both, customers can usually log in and pay early or catch up on a missed instalment, often by entering card details again.
Where card-based collection leaks
Cards change. Debit cards expire, get lost or are replaced after fraud. A stored card can stop working before a plan ends, and the first sign is a declined repayment.
The money is not always on that card either. Many people hold more than one current account. The card saved at checkout may be linked to an account that is empty on the due date, while the customer's salary sits in another one.
Retries create harm as well as cost. Retrying a declined card later in the day may recover the payment, or it may push a customer into an unarranged overdraft. Under the Consumer Duty, how and when lenders retry is now a conduct question, not just a recovery tactic.
Every instalment also carries card fees. Card scheme and processing costs apply to each repayment, which adds up on small, frequent payments. And customers have little control: those who want to repay from a different account, pay part of an instalment or move a date often have to contact support.
What pay by bank changes
Open banking payments, often called pay by bank, let a customer pay directly from their bank account through their banking app. The payment is initiated by an FCA-regulated provider, authenticated by the customer's own bank and settled over Faster Payments.
For BNPL repayments, that changes a few important things. The customer pays from the account that actually has the money, because a repayment link can be paid from any of their accounts, not just the one behind the card saved at checkout. Nothing expires, since there is no card number to go out of date and no card details to store. Funds arrive in seconds, so the lender sees the repayment immediately and can stop reminders straight away. Open banking payments do not carry card scheme fees. And the customer stays in control: paying early, paying part of an instalment or catching up after a missed payment all work through the same link.
Recurring repayments and Variable Recurring Payments
The obvious question is whether pay by bank can collect instalments automatically, the way a stored card does.
Today, open banking repayments for BNPL work through payment requests that the customer approves, either as a reminder before the due date or as a catch-up link. That works well for early repayments, missed payments and customers who prefer to stay in control. It does need a tap from the customer each time.
Variable Recurring Payments (VRPs) remove that step. The customer authorises the lender once, within limits they set, and payments are collected from their bank account after that. Commercial VRPs went live through the UK Payments Initiative on 2 June 2026, but the first wave covers utilities, regulated financial services such as mortgage servicing, e-money, government and charities. BNPL and unsecured loan repayments are not part of it. Wider use cases are expected in later waves, but the timing for BNPL hasn't been confirmed. Lenders who already collect by pay by bank will be in the best position to move when BNPL becomes eligible.
How Fena helps
Fena is an FCA-regulated open banking provider. BNPL lenders can use our payment links and API to let customers make repayments, catch up on missed instalments or pay early from any of their bank accounts, with funds settled over Faster Payments. The same platform supports bulk payouts for refunds and merchant settlement, and consented account data for affordability checks.
Common questions
Is pay by bank compatible with the new FCA rules for BNPL?
Yes. Pay by bank is a payment method, not a credit product. It can help lenders meet expectations under the Consumer Duty by giving customers more control over when and from which account they repay.
Can customers repay early or in part?
Yes. The lender sets the amount on each payment request, so it can offer early settlement, a single instalment or a partial amount.
Does pay by bank replace the stored card?
It can sit alongside it today. Many lenders start with pay by bank for catch-up payments and early repayments, then extend it as VRP becomes available for BNPL.
Is it secure for customers?
Customers approve every payment in their own banking app with their bank's usual security. They never share login details or card numbers with the lender.
Article by
Gosia Furmanik
CEO and Founder
Published on
