Deferred Payment Credit (DPC), commonly known as Buy Now Pay Later, has become a familiar part of the retail checkout experience. For many consumer brands, it helps drive conversion, increase basket sizes and offer customers greater flexibility. But from 15 July 2026, the introduction of FCA regulation will change how these products are offered, creating new challenges and opportunities for both lenders and retailers.
Over the past few years, DPC has grown more popular for UK consumers looking to spread the cost of purchases and manage their monthly budgets. According to the Financial Conduct Authority (FCA) Financial Lives 2024 Survey, one in five adults (10.9 million) bought goods using DPC in the 12 months to May 2024, up from 17% (8.8 million) in 2022.
Until recently, DPC remained largely unregulated in the UK. As a result, consumers did not benefit from some of the protections associated with other regulated retail finance products, including affordability checks and access to independent dispute resolution. The new rules will introduce stricter affordability checks around how DPC is offered. In practice, this could mean fewer shoppers being approved, more steps at checkout, and a shift in how – and how often – people choose to use it.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
For retailers, the challenge is not simply understanding the new rules but managing what comes next: balancing additional friction in the customer journey with continued customer demand for flexible ways to pay.
The retail finance model at the point of sale
For consumer brands, retail finance, including DPC, offers significant advantages, driving higher sales volumes, increasing order values and helping customers access greater payment flexibility. More commonly, brands partner with third-party financial institutions, which pay the retailer upfront on behalf of the customer and then collect repayment from the customer over time, often in instalments.
As DPC comes under FCA regulation, these partnerships will come under greater scrutiny. Retailers will need confidence that their chosen providers can meet new regulatory requirements while continuing to deliver a smooth customer experience and support commercial objectives.
What can we expect from the new requirements?
The new DPC regulations will establish clearer expectations for providers, with the FCA overseeing DPC activity across the market. As such, retailers need to ensure that any future third-party providers have obtained the necessary FCA authorisation and comply with the new rules, as will be required when the new regulations come into place. In addition, an FCA-authorised firm must approve DPC financial promotions.
Retailers should also assess whether existing and prospective providers have the operational capability, compliance expertise and financial resilience to operate successfully under the new regime. FCA authorisation is an important requirement, but it should be viewed as part of a broader assessment of a provider’s ability to support customers and maintain compliance over the long term.
Under the new regime, consumers will receive clearer information about their agreements, including when payments are due, the amounts payable and what happens if they miss a payment. Lenders will carry out checks to verify that customers can afford to repay borrowed sums before offering DPC services. Lenders will also be expected to offer support to customers in financial difficulties and, where appropriate, direct them to free debt advice resources. And if customers are unsatisfied with the service, they will be able to report valid complaints to the Financial Ombudsman Service (FOS).
While additional checks and disclosures may introduce some friction, regulation also has the potential to strengthen trust in the market. As financial products become more widely adopted, greater consumer protections often help create a more sustainable foundation for long-term growth.
This is, of course, in stark contrast to pre-regulation operation, where BNPL was exempt from consumer credit regulation, had no requirement for creditworthiness, and was subject only to the general laws affecting financial promotions and consumer protections. However, to make this transition less stark, there is a process to guarantee market continuity. Existing providers not currently authorised for consumer credit activities will be granted the Temporary Permissions Regime (TPR) to continue offering DPC while the FCA considers their applications for the necessary permissions.
Turning regulation into opportunity
The brands that prepare early will be in the strongest position to adapt. By reviewing lending partnerships, understanding potential impacts on customer journeys and planning for changing consumer behaviour, retailers can approach July 2026 as more than a compliance deadline. It is an opportunity to build stronger, more trusted retail finance experiences for the long term.
George Toumbev, Chief Commercial Officer at NatWest Boxed
