Picture a familiar situation. A customer orders something with BNPL, sends it back, and the next instalment comes out of their account anyway. The refund is "being processed". The retailer says it's with the BNPL provider. The BNPL provider says it's waiting for the retailer. The customer is out of pocket for something they no longer have.
It's rarely anyone's intention. It's what happens when three separate money flows are handled by three separate processes that don't talk to each other.
A BNPL provider runs three flows at once
From the outside, BNPL looks like one transaction. From the inside, it's three.
The provider pays the retailer for the goods, usually in batches, minus its fee. It collects instalments from the customer over the following weeks. And when goods are returned, cancelled or disputed, it has to unwind part of both: reduce or close the customer's plan, refund anything already paid, and recover the amount from the merchant.
In categories with a lot of returns, such as fashion, that third flow isn't an edge case. It's a significant part of the operation.
Where it leaks
The trouble usually sits in the gaps between the flows.
Refunds to a card can take several working days to reach the customer. If the card used at checkout has since been replaced, the refund can take longer still, or need manual handling. Meanwhile, the scheduled repayment runs, because the plan adjustment hasn't caught up with the return.
On the merchant side, the value of each return has to be recovered from the merchant as well, which adds another step between the return and the refund.
None of this is unusual. But each delay is a customer waiting for money they're owed, and each one turns into a support contact.
Why it matters more now
Since 15 July 2026, BNPL lenders have been regulated by the FCA and subject to the Consumer Duty. Customers can now take complaints to the Financial Ombudsman Service. Slow refunds and instalments taken for goods already returned are exactly the kind of outcome the Duty is meant to prevent, and exactly the kind of complaint the Ombudsman will now hear.
The direction of travel is clear: customers will expect BNPL refunds to be handled as quickly and reliably as any other form of credit.
What closing the loop looks like
The idea is the same one we apply in every sector we work in. The system that knows why money is moving should be the one that moves it, with the details attached. For a BNPL provider, open banking makes that practical across all three flows.
Refunds can be sent over Faster Payments to the customer's bank account, ideally the verified account they repaid from, and arrive in seconds rather than days, with no dependency on a card that may have changed. If repayments are collected by pay by bank requests rather than automatic card charges, an adjusted plan simply means a different request, or no request at all. Bulk payouts over Faster Payments let providers settle with merchants quickly and on their own schedule, with clear references that match the merchant's statement. And when payments in and out run through the same platform, reconciling a sale, its repayments and its refund becomes one record, not three systems.
Where we fit
We're not the biggest payments provider in the UK, and we won't pretend to be. What we offer BNPL providers is a single FCA-regulated platform for the whole loop: pay by bank for repayments, bulk payouts for refunds and merchant settlement, and consented account data for affordability checks. You'll work directly with the people who built it.
If your refunds still depend on a card the customer may no longer have, it's worth an hour to look at the loop end to end.
To talk about BNPL refunds and settlement, email sales@fena.co.
Article by
Gosia Furmanik
CEO and Founder
Published on
