Retailers will face significant friction amid the tightening of the rules for Buy Now Pay Later (BNPL) in the UK, and will need to respond with strong value messaging and good‑better‑best options across product ranges, in order not to lose sales from financially challenged customers.
The UK’s decision to bring BNPL under full Financial Conduct Authority (FCA) oversight from July 2026 involves the introduction of mandatory affordability and creditworthiness checks on every BNPL transaction. With 36.3% of BNPL users* relying on instalments because they cannot afford to pay upfront, stricter affordability checks mean fewer shoppers could be eligible. This will particularly impact big-ticket items, where alternative payment methods cannot easily be swapped in.
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50.2% of 25–34-year-olds in the UK have used BNPL options in the last 12 months*, and this cohort is disproportionately exposed to rising housing and childcare prices as well as unexpected costs, making instalments an attractive way to manage larger baskets and concentrated spending periods, such as Christmas. This group is also highly active in e-commerce and app-led shopping, where BNPL is embedded at checkout. As a consequence of these changes to BNPL, online retailers with younger customer bases face the greatest risk of softening demand. Retailers must react by offering clear value messaging to help shoppers justify purchases, emphasising durability and quality, and implementing targeted promotions to reduce the immediate price barrier. Promotions should be focused on higher-ticket items, around payday, or among lapsed customers to prompt completion and protect sales that would otherwise be lost if BNPL approvals decline.
In the UK, 6.7% of BNPL users have missed final payment deadlines, and this figure rises to 9.8% among C2 and 9.1% among DE users*. These results highlight the tighter financial constraints within these socioeconomic groups, and therefore a higher likelihood of failing new affordability checks. While stricter assessments and heightened consumer duty expectations placed on lenders should improve customer outcomes, they will also reduce effective spending power for C2 and DE shoppers who have been using instalments to smooth cash flow. Businesses serving younger, more credit-reliant or price-sensitive audiences should plan for weaker BNPL-enabled demand from July 2026. Retailers must implement a good-better-best tiering of their ranges, offering entry, mid and premium options. This will allow shoppers to trade down to stay within budget, or trade up when affordability allows, while keeping sales within the organisation
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