Buy Now, Pay Later (BNPL) has received a lot of attention lately, and not necessarily for good reasons. With concerns about irresponsible lending, it’s become a divisive topic for many UK businesses.

In case you’re unfamiliar, BNPL is a short-term financing option that lets customers split a purchase into several interest-free installments, paid over a few weeks or months.

Now, a new regulatory overhaul in the UK is set to take affect, potentially impacting thousands of retailers and restaurants offering the payment options. Whether you’re already offering BNPL at the till or you’ve been weighing up whether to add it, the rules of the game are about to change.

Soon, businesses offering these services will need to meet strict affordability criteria, and many everyday shops may lose the ability to offer it altogether. Starting July 15, 2026, any BNPL lender will need to be fully authorised or hold a temporary permission to keep operating. The FCA’s core expectation is that lenders lend responsibly, give consumers clear information, and support customers who get into financial difficulty.

On top of that, the costs involved are worth a serious look. Let’s take a closer look at BNPL, the coming regulations, and whether it’s a good match for your business.

What Is Buy Now Pay Later?

Buy Now, Pay Later is a short-term financing option offered at the point of sale, either online or in-store. Instead of paying the full amount upfront, customers can split the cost of a purchase into smaller instalments, typically three or four payments spread over a few weeks or months. In most cases, no interest is charged, which makes it an attractive alternative to a credit card. Services like Klarna, Clearpay, and PayPal all offer their own versions of this, and over the past few years BNPL has become a common sight at checkout, particularly in fashion and retail.

For businesses offering the service, however, the costs of offering BNPL can be quite expensive. They vary depending on the provider, but they are almost always higher than a standard card payment, which typically runs at around 1.6%. Klarna charges merchants 4.99% plus £0.30 per transaction, and an additional 2% on top of that if you’re not integrated directly with their app. PayPal offers a standard transaction rate of around 2.9% + £0.30, making it the more affordable option, though still nearly double a card payment. There are others, of course, each with different rates. The bottom line is that, for businesses with tight margins, these costs can add up quickly and eat into already thin profits.

The Rules for BNPL Are Changing

As mentioned, new regulations are about to take affect, which is likely going to impact thousands of businesses currently offering BNPL. The UK’s Financial Conduct Authority will begin regulating BNPL, officially referred to as Deferred Payment Credit, on 15 July 2026. From that date, any lender offering BNPL will need to be fully authorised by the FCA, or hold a temporary permission to keep operating while their application is processed.

For everyday retailers and restaurant owners, this means the relatively frictionless way BNPL has been offered at the till is going to become more regulated and scrutinised. If you’re currently offering BNPL through a third-party provider like Klarna or Clearpay, the burden of compliance falls primarily on them rather than you. But it’s worth understanding what’s changing, because the services you offer your customers will be affected, and the window to prepare is shorter than it might seem.

Is BNPL Right for Your Business?

BNPL isn’t inherently a bad thing; it genuinely has its place. If you’re selling high-ticket items, offering customers the ability to spread the cost can make a real difference to conversion rates, and the fee you pay the provider can be justified by the uplift in sales. A furniture retailer, a jeweller, or a high-end fashion boutique can make a reasonable case for it.

But if you’re running a restaurant, a convenience store, or any business where margins are already tight and average transaction values are low, the numbers rarely stack up against you. Paying 4.99% plus £0.30 on a £15 lunch, when a card payment would cost a fraction of that, isn’t a customer perk. Your business absorbs it without a meaningful return. Add to that the incoming FCA regulations, the affordability criteria businesses will need to navigate, and the growing public scepticism around BNPL, and the case for smaller operators gets thinner still.

Ultimately, if you’re considering BNPL, you need to know your customers and margins, and do the maths before signing up. BNPL can work well in the right context, but for many smaller retailers and hospitality businesses, a standard card payment remains the simpler, cheaper, and now arguably safer option.

Need help setting up payment systems and weighing your options? Everything EPOS can help! Contact our specialists to discuss payment options and find a setup that works for your margins.