Buy now pay later (BNPL) borrowing has long been an area of focus for the FCA, and the new regime follows a prolonged period of research and consultation with the industry and regulatory action over unfair contract terms and misleading advertising.

While some businesses in the sector argue that increased regulation could restrict access to credit for those excluded from mainstream finance, frictionless customer journeys are currently enabling deferred payment borrowing that can quickly escalate from short-term credit into long-term, unmanageable debt. Usage is particularly high among consumers with low financial resilience, including younger people and those on lower incomes, heightening the risk of financial harm.

The incoming regulation that relies on the Consumer Duty, and the customer understanding and customer support outcomes in particular, as part of the FCA’s outcome-based framework, will provide better protection for end customers. The increased affordability checks and greater transparency at checkout should reduce the risk of over indebtedness and increase customer understanding.

This move by the FCA aligns with wider efforts to ensure customers are making informed and sustainable financial decisions as well as demonstrating the regulator’s approach to supporting digital customer journeys and ensuring customers, in particular those that may be vulnerable, are supported and protected.