Buy Now Pay Later for merchants: the UK rules changed on 15 July 2026

Buy Now Pay Later can let a merchant receive the sale proceeds from a finance provider while the customer repays that provider in instalments. From 15 July 2026 the FCA began regulating Deferred Payment Credit, the interest-free form of BNPL that is repayable in 12 or fewer instalments within 12 months where the relevant third-party-lender conditions are met.

Deferred Payment Credit became FCA-regulated on 15 July 2026

The FCA says DPC, commonly called BNPL, became regulated from 15 July 2026. Lenders need FCA authorisation or temporary permission where required to continue offering regulated DPC.

Merchants should therefore check the lender behind the checkout option and understand whether their own activity falls within credit-broking or related regulatory requirements.

Not every pay-later arrangement is regulated in the same way

The FCA distinguishes regulated third-party DPC from arrangements that fall outside the new regime, including cases where the supplier and lender are the same person under the relevant exemption.

Do not label every instalment feature "regulated BNPL" without checking the legal structure. The customer journey can look similar while the regulatory treatment differs.

The merchant normally receives settlement from the finance provider

In a typical third-party BNPL model, the merchant sells the customer purchase and the finance provider funds the transaction under its agreement. Merchant settlement timing and deductions depend on the provider contract.

Finance should treat the provider as a payment and financing counterparty, not as the end customer. The customer's instalment schedule belongs to the lender relationship.

Compare merchant fees with card and bank-payment alternatives

BNPL providers can charge the merchant a percentage fee or other commercial pricing. The cost can be higher than ordinary card acquiring but can increase conversion or average order value.

Measure incremental sales and margin rather than focusing only on checkout conversion. A financing method is valuable only if the extra gross profit exceeds the extra payment cost and refund workload.

Refunds need coordination between merchant and lender

When goods are returned, the merchant normally processes the refund through the BNPL provider so the customer's finance balance is adjusted correctly.

Do not refund directly by bank transfer unless the provider process says to do so. Otherwise the customer can receive cash while the lender still shows the instalment debt outstanding.

Reconcile gross orders, provider fees, refunds and net payouts

Use the provider transaction ID to connect the ecommerce order to the settlement. Keep BNPL payouts separate from ordinary card batches where possible.

Track failed or cancelled finance approvals separately from successful orders. A checkout session does not become a sale until the provider confirms the financed payment.

Worked example: a merchant sells a £600 item using regulated DPC. The customer pays the lender in several interest-free instalments, while the merchant receives the provider settlement less its merchant fee. The merchant should record £600 gross sale, the provider fee separately and any later return through the provider's refund workflow.

Update website terms and staff training after July 2026. Marketing should not imply that credit approval is guaranteed or that all BNPL products are identical. Customer-service staff also need to know whether a dispute is about the goods, the payment provider or the credit agreement.

Review provider authorisation and commercial resilience annually. A checkout can become dependent on one lender, and a provider outage or policy change can affect a meaningful share of sales. Keep at least one alternative payment route for customers who cannot or do not want to use BNPL.

Measure refund time as part of provider performance. A merchant can approve a return immediately while the customer's BNPL balance takes longer to update. Slow credit adjustments can create support complaints even when the retail refund process was handled correctly.

Segment BNPL economics by basket size. A fixed or percentage provider fee can have very different margin impact on a £40 order and a £1,000 order. The merchant should know which product categories gain enough conversion to justify the financing cost.

Keep marketing language aligned with the regulated lender's approved wording. Merchants should not describe DPC as free money, guaranteed approval or risk-free instalments. The lender's regulated credit process remains separate from the merchant's sales promotion.

Track BNPL approval rate separately from merchant checkout conversion. A customer can choose BNPL but fail the lender's affordability or fraud checks, leaving the order unpaid. The sales funnel should show where finance approval stops the transaction rather than attributing every abandonment to the merchant site.

Set operational ownership for lender complaints. Product-quality disputes belong with the merchant, while credit-agreement questions can belong with the regulated lender. Customer support should know the handoff so borrowers are not sent repeatedly between companies.