The age of unregulated buy now, pay later products is now over. The Treasury has issued proposals to bring BNPL providers under the purview of the Financial Conduct Authority, making such providers meet much tighter standards than they have grown used to. This reform is a watershed moment for an industry hitherto largely unregulated, despite handling billions of consumer transactions. Firms like Klarna, Zilch, and others will now be obligated to perform strong affordability checks before permitting customers to pay for their purchases in instalments.
What Changes Are Coming?
The new regulations cause BNPL firms to think more seriously about customers’ finances before they authorize the buys. They will have to take into account income, what they spend, and what financial obligations they have to ensure individuals can actually cover the debt they are assuming. It’s a long way from the immediate, quick authorization that made the products so popular in the beginning.
For the typical consumer, this might translate into waiting longer and perhaps receiving more rejections while attempting to utilize BNPL services to pay for their shopping sprees.
Klarna Feels the Pressure
The worst time is when it happens for Klarna, the Swedish behemoth that controls the BNPL market. As the firm reported, its revenue increased 13% to $701 million during the first quarter of 2025 and saw its milestone of over 100 million customers. Something is brewing in the background.
The company’s consumer credit losses jumped 17% to $136 million as more customers struggled to meet their payment obligations. Net losses nearly doubled from $47 million to $99 million, highlighting the growing pains in an industry built on the premise that most people will pay back what they owe.
Industry Braces for Impact
Tony Redondo from Cosmos Currency Exchange doesn’t mince words about what’s coming next. “BNPL firms like Klarna will brace for compliance costs, potentially hiking fees or exiting,” he warns. The ripple effects could extend far beyond the fintech companies themselves.
Retailers who have grown dependent on BNPL services might feel the pinch too. Klarna alone works with 22,000 retail partners who could see sales drop if customers find it harder to split their payments. When people can’t buy now and pay later, they might just decide not to buy at all.
Janine Hirt, who leads fintech industry body Innovate Finance, raises an interesting point about unintended consequences. If BNPL options become less available due to stricter rules, consumers might turn to credit cards instead and that could cost them more money in the long run.
“Consumers would face the risk of interest if they are left with no choice but to use a credit card,” Hirt explains. It’s a valid concern, especially when you consider Klarna’s own data showing that consumers would have paid £500 million in interest over the past decade if they’d used credit cards instead of interest-free BNPL services.
Despite the challenges ahead, Klarna maintains it’s been preparing for this moment. The company says it already conducts affordability checks and external credit checks for each purchase, suggesting the new rules won’t require a complete overhaul of their operations.
A Klarna spokesperson struck a diplomatic tone, saying the company has “supported regulation to keep it safe and accessible since 2020” and looks forward to working with the FCA on rules that “protect consumers and encourage innovation.”
What This Means for Shoppers
For the millions of Brits who’ve grown accustomed to splitting their purchases into bite-sized payments, these changes represent a new reality. The quick and easy approval process that made BNPL so attractive may become a thing of the past, replaced by more thorough vetting that could slow down or block transactions.
While consumer protection advocates will likely welcome the added oversight, shoppers may find their purchasing power somewhat constrained as the industry adjusts to operating within formal regulatory boundaries.
The wild west era of buy now, pay later is ending, but whether that’s good or bad news depends largely on which side of the transaction you’re on.
