Regulation and Consumer Credit Act Reform Will Drive BNPL Consolidation and Sustainable Growth

By Iana Vidal, Head of UK Public Policy, Clearpay

The UK’s Buy Now, Pay Later (BNPL) sector is gearing up for some significant changes in 2025. With new regulations on the horizon, and long-overdue updates to the Consumer Credit Act (CCA), the sector is set to benefit from much-needed clarity.

For the industry, this means the introduction of proportionate compliance standards for all players and a more transparent operating environment across the board.

For consumers, this marks a turning point – the introduction of consistent protections across all providers will cement BNPL as a trusted go-to for those looking for more flexible payment options.

What’s happening with BNPL in the UK?

BNPL has become an everyday preferred payment method for millions of people, offering a simple way to spread payments over the short term without the risk of high interest associated with traditional credit products. What started as a budgeting tool for Millennials has matured into a payment option embraced by all age groups[1].

In the 12 months leading to January 2024, 38% of Brits had used BNPL[2]. This growth trajectory comes with a significant responsibility to safeguard consumers while providing them choice. The UK Government’s commitment in October last year to regulate BNPL is a critical step to achieve this. The proposed framework promises to level the playing field and give shoppers using BNPL the same safeguards as those using other credit products, like access to the Financial Ombudsman Service and protection under Section 75 for purchases over £100. This is something for which Clearpay has always advocated.

The key here is balance, creating rules that protect consumers whilst allowing innovation and supporting continued growth and competition within the sector.

What can we learn from New Zealand?

Turning to other markets for inspiration, the UK should consider the ways in which New Zealand recently updated its Credit Contract and Consumer Finance Act (CCCFA) to include BNPL – a change that’s both fair and forward-thinking.

The New Zealand model avoids a one-size-fits-all approach and provides a tailored framework for BNPL that’s both principles-based and outcomes-focused, anchoring on flexible consumer centric principles that implement safeguards without hampering innovation. In many ways this mirrors the UK’s  Consumer Duty framework.

New Zealand’s approach has been a game-changer for companies like Afterpay (Clearpay’s equivalent in New Zealand), enabling it to innovate responsibly, such as through creditworthiness checks and credit bureau collaborations, while protecting consumers from potential financial harm.

The UK should take note. All BNPL providers, regardless of size or market dominance, should be held to the same high standards to avoid consumer confusion and ensure fairness. Addressing potential loopholes in current proposals, such as exemptions for large retailers and big tech firms, is essential for a consistent and robust regulatory framework.

Why this matters

The reforms to the CCA and the introduction of tailored BNPL regulation offer a unique opportunity for UK FinTech to thrive.

Done right, these changes could unlock a wave of innovation. Flexible and proportionate rules, like those in New Zealand, would allow providers, both large retailers and small businesses, to offer new products and services that better meet the needs of a diverse range of consumers seeking greater flexibility. For the wider economy, it sends innovators a clear signal that the UK is open for business, ready to attract investment and the next generation of FinTech talent.

Forging this path ahead in 2025 requires collaboration between policymakers, industry players, and consumer advocates. By learning from international best practices, addressing regulatory inconsistencies, and fostering an environment of trust, the UK can ensure that BNPL continues to grow responsibly, offering shoppers more choice and flexibility, and giving businesses new ways to thrive.

The future of BNPL is bright. Now it’s up to us to make sure we get the foundations right.


[1] UK Finance

[2] https://www.finder.com/uk/buy-now-pay-later/buy-now-pay-later-statistics

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