How buy now, pay later works
The buyer picks the BNPL option on the payment page, and the lender decides within seconds whether to approve. If it does, the lender pays the merchant the purchase price less a fee. The buyer then repays the lender by card or direct debit, in one delayed payment or in instalments.
The merchant is paid whether or not the buyer repays: the lender carries the credit risk and the fraud risk. That is what the merchant's fee, typically higher than a card fee, pays for.
How BNPL is regulated in the UK and the EU
In the UK, the FCA calls the product deferred payment credit: interest-free credit repayable in 12 or fewer instalments within 12 months or less. Since 15 July 2026 such an agreement is regulated where the lender and the supplier of the goods or services are not the same person. A merchant offering its own credit directly is not covered.
In the EU, Directive (EU) 2023/2225 on consumer credit brings buy now, pay later schemes into scope, even where the credit is free of interest and charges. Member states apply its rules from 20 November 2026. The directive's recitals leave out a supplier that itself gives a buyer time to pay, with no third party offering credit and payment within 50 days of delivery.
Why BNPL matters to a gateway
A payment service provider usually adds BNPL as one more payment method, by integrating a lender. Offering the credit itself is lending, with its own authorisation, funding and credit losses, and is a different business from processing payments.
Where buy now, pay later shows up in a platform
Modules that do the work
- CheckoutA hosted checkout for cards, wallets, bank payments and crypto, routed to the best provider.
- Fraud & riskReal-time fraud scoring, limits and case management, with the risk engines you already trust.
- Card acquiringCard acceptance on the phone, in store and online, through the acquirer you choose.
Platforms that need it
Guides that go deeper
Where it is written
The laws and standards this page's facts come from.
- FCA, Regulating Buy Now Pay Later (BNPL), updated 15 July 2026
- FCA, PS26/1: Regulation of Deferred Payment Credit
- Directive (EU) 2023/2225 on credit agreements for consumers (EUR-Lex)
General information, not legal advice: what applies to you depends on your services and your market.