Buy Now Pay Later: can your onboarding systems cope with impending new regulations?


Pending findings from the latest FCA Consultation into ‘Buy Now Pay Later’ (BNPL) products, Aaron Harvey, Business Development Director at TruNarrative, looks at the market growth and surrounding technical and compliance challenges that BNPL firms may soon face.

Buy Now Pay Later services are becoming increasingly popular. Offering a lifeline for those who need an item upfront but who do not have the full amount immediately available.

Unlike most financial products, the Buy Now Pay Later loans do not yet have to meet any regulatory criteria around affordability. Increasingly, consumers are entering into multiple agreements leading to a rise in Non-payment and non-conformance.

Astonishing growth

According to Worldpay, Buy Now Pay Later services for online shoppers are growing at 39% a year. In the UK, the market tripled in 2020, and is expected to grow by 400% by 2025.

A recent FT article highlights how even traditional credit players and brands including Mastercard, Paypal, Apple, Amazon, Revolut and Monzo are now taking an interest in different BNPL approaches.

Recent research by credit reference service Credit Karma found UK shoppers currently have £4.14 billion of debt on Buy Now Pay Later agreements. Of the 11.6 million UK active customers on lenders’ books, almost 8 million had outstanding balances averaging £538. As BNPL products are not currently classified as regulated ‘credit’, the records left on a customer’s file are not routinely recorded on credit files even when repayments are missed.

Simply put, this can be an invisible debt that credit reference agencies and mainstream lenders are not aware of.

Scrutiny in progress

Regulation of Buy Now Pay Later arrangements has been under Consultation by the Treasury.

The Consultation preface observes that “despite the Consumer Credit Act 1974, there has been an exemption in place allowing delayed payment of goods and services, providing the delay was time-limited and did not involve the charging of interest. This has kept invoicing and payment for goods by instalments outside the scope of current regulations. Now, faced with a rapid growth in Buy-Now Pay-Later products, especially by online retailers, and wider concerns over affordability, the government is keen to explore proportionate regulatory controls.

The Woolard Review, published in February 2021, highlighted some detrimental consumer aspects of BNPL. Concerns included promotion to consumers, poor consumer understanding of the product, lack of affordability assessments and inconsistent treatment of customers in financial difficulty.”

Proportionate regulation

The government will want to ensure that any new regulation does not prevent merchants from offering a payment choice that consumers find convenient, whilst also developing regulation to address the specific risks and features of the product.

A recent Tweet from HM Treasury affirms clear intent:


Agility matters

Once we know early this year what measures are proposed, I’ll comment accordingly. But in the meantime, look carefully to see if your current systems can accommodate more complex, regulated onboarding journeys.

Routine Fraud, ID, Device, Email, PEPs, Sanctions and any AML checks need to be fast frictionless if additional credit and affordability checks are mandated as well.

Let’s await the results of the Consultation.

Get in touch to find out how TruNarrative can help orchestrate your onboarding and compliance strategies.


Would be great to hear what you think the findings will be, share your thoughts below