Buy Now, Pay Later for Merchants: BNPL, Gateways & UK Regulation

Buy Now, Pay Later can give customers the option to spread or defer the cost of a purchase instead of paying the full amount at checkout.

For merchants, however, BNPL is not simply another card-payment button.

The setup can involve:

• a third-party credit provider;
• the merchant's website or ecommerce platform;
• a payment gateway or payment service provider;
• checkout integration;
• customer eligibility checks;
• refund and cancellation processes;
• settlement to the merchant;
• fees charged by the BNPL provider; and
• consumer-credit regulation.

UK regulation also changed materially in July 2026.

Businesses considering BNPL should therefore look at the complete commercial, technical and regulatory setup rather than simply asking which provider offers the lowest fee.

What is Buy Now, Pay Later?

Buy Now, Pay Later, usually shortened to BNPL, is a broad term used for payment arrangements that allow a customer to receive goods or services while paying later or across a number of instalments.

One important category is Deferred Payment Credit, or DPC.

The FCA describes DPC as interest-free credit repayable in 12 or fewer instalments over 12 months or less.

Typical customer journeys can include:

• paying in several interest-free instalments;
• deferring the full payment until a later date; or
• choosing a credit option during online or in-store checkout.

The customer usually enters into a credit arrangement with the BNPL lender while the merchant receives payment under the commercial arrangement agreed with that provider.

UK BNPL regulation changed on 15 July 2026

The FCA began regulating Deferred Payment Credit on 15 July 2026.

Third-party DPC agreements are now regulated credit agreements where the lender and supplier are different businesses and the relevant regulatory conditions are met.

This means third-party DPC lenders need the appropriate FCA consumer-credit authorisation or a valid temporary permission to enter into new regulated DPC agreements.

The FCA's regulatory framework is intended to require lenders to provide appropriate information to customers, lend responsibly and affordably, and support customers experiencing financial difficulty.

For merchants, the important point is that BNPL should now be considered as both a checkout method and a regulated credit relationship involving the BNPL lender.

Does a merchant need FCA authorisation to offer BNPL?

Not necessarily.

The FCA states that broking third-party Deferred Payment Credit agreements is exempt from regulation.

This means a merchant offering an eligible third-party BNPL option at checkout does not automatically become an FCA-authorised credit broker simply because the customer can choose that payment method.

However, this should not be confused with the merchant itself acting as the lender.

The regulatory position can differ depending on:

• who provides the credit;
• who is legally supplying the goods or services;
• the structure of the agreement;
• whether interest or other charges apply;
• the repayment period;
• the number of instalments; and
• the type of product or service being financed.

Businesses designing their own deferred-payment or instalment arrangements should obtain appropriate regulatory advice rather than assuming that every arrangement described as BNPL is treated the same way.

How does BNPL work for merchants?

In a typical third-party BNPL journey:

1. The customer reaches the merchant's checkout.
2. BNPL appears as one of the available payment options.
3. The customer selects the BNPL provider.
4. The lender completes its own eligibility and credit assessment.
5. If approved, the purchase proceeds under the lender's terms.
6. The merchant receives settlement according to its agreement with the provider.
7. The customer repays the lender according to the BNPL agreement.

The merchant is therefore not normally waiting for every customer instalment before receiving the purchase value.

However, settlement timing, merchant fees, refunds, chargebacks, returns and commercial responsibility depend on the provider agreement.

Is BNPL part of the payment gateway?

Sometimes.

BNPL can be made available through several different technical structures.

Through an existing payment gateway or PSP

Some payment gateways and payment service providers allow merchants to activate supported BNPL methods through an existing integration.

Through an ecommerce platform

Platforms such as ecommerce systems may offer plugins, apps or native integrations for selected BNPL providers.

Through a direct BNPL integration

Larger or more technically complex businesses may integrate directly with a BNPL provider using APIs or other integration methods.

Through a broader alternative-payment-method integration

A gateway or PSP may offer BNPL alongside wallets, bank payments and other local payment methods through one payment stack.

For the wider payment-method structure, see our Alternative Payment Method Gateway guide .

BNPL vs card instalments

BNPL should not automatically be treated as the same thing as splitting a card payment into several transactions.

With third-party BNPL, a separate lender normally provides the customer credit.

A merchant simply charging a customer's card several times under an agreed payment schedule may instead be operating a recurring or instalment card-payment arrangement.

These models can have different:

• credit relationships;
• customer agreements;
• payment-processing requirements;
• regulatory treatment;
• chargeback exposure; and
• commercial costs.

The business should therefore decide whether it genuinely wants to offer customer credit through a BNPL partner or simply needs a payment method that collects an agreed purchase price in stages.

BNPL vs staged payments and deposits

BNPL can also be confused with deposits and staged-payment arrangements.

For example, a business might take:

• a deposit when an order is placed;
• a further payment before delivery; and
• the balance once work is completed.

That does not necessarily mean the merchant is offering BNPL.

The distinction matters particularly for businesses in sectors such as:

• home improvements;
• furniture;
• travel;
• events;
• education;
• professional services; and
• other higher-value purchases.

The payment provider may also be interested in the merchant's future-delivery exposure where customers pay before goods or services are supplied.

What does BNPL cost a merchant?

There is no universal BNPL merchant fee.

Commercial terms vary by provider and can depend on factors including:

• merchant sector;
• transaction value;
• monthly sales volume;
• refund levels;
• customer geography;
• BNPL product;
• integration route;
• commercial negotiations; and
• the wider gateway or PSP relationship.

BNPL pricing should therefore be compared separately from ordinary card-acquiring costs.

A merchant should establish:

• the transaction or merchant fee;
• whether there are setup charges;
• monthly platform charges;
• refund treatment;
• dispute costs;
• settlement timing;
• currency or international charges;
• gateway costs;
• minimum commitments; and
• contract terms.

For broader online-payment costs, see our Payment Gateway Fees guide .

Does offering BNPL improve checkout conversion?

BNPL can give some customers another way to fund a purchase, but merchants should avoid assuming that simply adding more payment buttons will automatically increase conversion.

The commercial question should be:

Do our customers actually want and use this payment method?

Relevant factors include:

• average order value;
• customer demographics;
• product type;
• repeat purchase behaviour;
• mobile vs desktop checkout;
• customer geography;
• the BNPL provider's eligibility rules; and
• the additional merchant cost.

A payment method that generates little customer usage but adds fees, reconciliation work and checkout complexity may provide limited value.

This is the same principle that applies more broadly to alternative payment methods : offer methods that fit the customer base rather than simply activating every method a gateway supports.

Which businesses may consider BNPL?

BNPL can be relevant where customers make purchases that they may prefer to spread or defer.

Examples can include:

• retail;
• fashion;
• electronics;
• furniture;
• health and aesthetics;
• home improvements;
• education;
• travel;
• higher-value ecommerce; and
• other consumer purchases.

However, provider acceptance varies.

A BNPL provider may have its own restrictions around:

• merchant sectors;
• products;
• regulated activities;
• customer countries;
• transaction values;
• future-delivery periods;
• refund exposure; and
• business models.

Being able to accept card payments through a gateway does not automatically mean that every BNPL provider integrated with that gateway will approve the merchant.

BNPL for higher-risk or restricted sectors

Businesses operating in a higher-risk or restricted payment sector should not assume BNPL will provide an alternative route around normal provider underwriting.

BNPL lenders have their own:

• merchant eligibility rules;
• risk appetite;
• credit policies;
• product restrictions;
• regulatory obligations; and
• commercial criteria.

A sector accepted by a merchant acquirer may still fall outside the appetite of the BNPL provider.

Likewise, a gateway advertising BNPL functionality does not guarantee that a specific merchant will be eligible to activate it.

Businesses with more complex payment requirements can also see our High-Risk Merchant Accounts guide .

Refunds, returns and cancellations with BNPL

Refund handling should be understood before BNPL is launched.

The merchant needs to know:

• how a full refund is submitted;
• how partial refunds work;
• how the lender adjusts the customer's repayment schedule;
• how quickly refunds are reflected;
• whether merchant fees are returned;
• how cancelled orders are handled;
• what happens where goods are returned after some instalments have been paid; and
• how disputes are reconciled between merchant, lender and customer.

This can become particularly important for merchants with high return rates or more complex fulfilment journeys.

Settlement and cash flow

One attraction of third-party BNPL for merchants is that the customer repayment schedule does not necessarily determine when the merchant receives its money.

The BNPL provider generally manages the customer credit relationship while settling the merchant according to the agreed commercial terms.

Merchants should nevertheless confirm:

• settlement timing;
• any deductions before settlement;
• refund treatment;
• reserve or security arrangements where applicable;
• how disputes affect settlement;
• currency treatment; and
• how settlement reconciles with the merchant's gateway and accounting systems.

For larger businesses, reconciliation can matter just as much as the checkout experience.

International BNPL

BNPL should not automatically be treated as one global payment method.

Provider availability, customer eligibility and regulation can vary by market.

A UK merchant selling internationally should consider:

• which countries the BNPL provider supports;
• where the merchant entity is established;
• customer location;
• supported currencies;
• local credit rules;
• settlement currency;
• refund handling;
• local consumer preferences; and
• whether a different payment method is more relevant in that market.

Businesses selling across several countries should consider BNPL as part of the broader alternative-payment-method strategy rather than assuming the same method will suit every market.

What should merchants compare when choosing a BNPL provider?

Merchant eligibility

Does the provider accept your sector, products, transaction values and fulfilment model?

Customer eligibility

Who can use the BNPL product and how does the provider assess customers?

Integration

Does it work with your website platform, payment gateway, app or checkout?

Merchant fees

What will each BNPL transaction cost and what other charges apply?

Settlement

When will the merchant receive funds?

Refunds

How are full and partial refunds handled?

Disputes

What responsibilities sit with the merchant and what sits with the lender?

Regulatory status

Where the product is regulated Deferred Payment Credit, is the lender appropriately authorised or operating under a valid regulatory permission?

Customer experience

How much friction does the BNPL journey add to checkout and how clearly are repayment terms presented?

Reporting and reconciliation

Can BNPL transactions, refunds, fees and settlements be identified clearly within the merchant's reporting?

How Merchant Advice Service helps with BNPL and payment gateways

Merchant Advice Service does not provide consumer credit or approve customers for BNPL.

Our role is to help businesses understand the payment and gateway requirement before identifying payment providers that may be suitable.

For businesses considering BNPL, that can include:

• ecommerce platform;
• existing payment gateway;
• merchant acquiring setup;
• BNPL requirements;
• other alternative payment methods;
• customer locations;
• currencies;
• average transaction value;
• monthly online turnover;
• integration requirements;
• refund processes;
• settlement requirements;
• reporting and reconciliation; and
• provider eligibility.

For the wider gateway decision, visit our Payment Gateway advice hub .

Sources & References

• Financial Conduct Authority – Regulating Buy Now Pay Later – current FCA guidance on Deferred Payment Credit regulation from 15 July 2026.
• Financial Conduct Authority – Buy Now Pay Later – consumer guidance explaining regulated Deferred Payment Credit and the protections now applying.
• Merchant Advice Service – Payment Gateway Advice – guidance on gateway functionality, integrations and payment methods.
• Merchant Advice Service – Alternative Payment Method Gateways – guidance on wallets, bank payments, local payment methods and BNPL within a wider APM strategy.
• Merchant Advice Service – Payment Gateway Fees – guidance on gateway costs and the wider cost of online payment acceptance.
• The Payments Directory® – Payment Gateway Providers – explore gateway providers and payment functionality.
• Merchant Advice Service – Editorial & Research Policies

Editorial & Commercial Disclosure

This guide provides general information for merchants considering Buy Now, Pay Later and Deferred Payment Credit within their checkout or payment setup.

UK regulation of third-party Deferred Payment Credit changed on 15 July 2026. Regulatory treatment depends on the structure of the credit arrangement and the activities carried out by the relevant businesses.

Merchant Advice Service is not a BNPL lender, consumer-credit provider or regulatory adviser and does not determine customer eligibility for credit.

MAS is an independent payments information and provider-matching service. MAS may receive a referral fee or commission from some payment providers where a business proceeds following an introduction. Commercial relationships do not determine the factual information or provider-selection principles contained within this guide.

Businesses should confirm the regulatory status, commercial terms, merchant eligibility and contractual responsibilities of any BNPL arrangement with the relevant provider and obtain specialist regulatory or legal advice where necessary.

Information is provided for general guidance and should not be treated as legal, regulatory, credit or financial advice.