BNPL to face regulation

Is Credit Risk hiring set to increase?

Alex Speedie

May 21, 2025

The Chancellor is expected to unveil long awaited reforms to the UK’s financial services sector during the Mansion House speech on 15 July. As legislative preparations begin in Parliament, early indications suggest the reforms will include significant structural and regulatory changes.

‍

Among the expected measures are the removal of the ringfencing requirements separating retail deposits from investment banking operations, a new mandate for investment funds to allocate 10% of their default assets to unlisted investments by 2030 with half of that to be invested in UK-based assets, and further detail on the operational framework of the PISCES regime.

‍

However, attention is now shifting towards consumer protection following the Financial Conduct Authority’s recent Financial Lives survey. The findings have raised concerns over increasing levels of consumer vulnerability and debt exposure, prompting speculation that the Government may introduce measures aimed at curbing predatory lending practices. A decade after regulatory reforms forced payday lenders such as Wonga out of the market, policymakers are now turning their focus towards the rapidly expanding buy now pay later sector.

‍

While there is no suggestion that the BNPL market is behaving in the same way as its payday predecessor, its pace of growth has led to warnings that it could be fuelling a broader debt problem. The FCA’s Chief Executive, Nikhil Rathi, who has been reappointed for a second five year term, is expected to continue steering a dual agenda of market liberalisation and consumer protection. This dual mandate has underpinned structural changes at the regulator, including the recent merger of the Payment Systems Regulator into the FCA to support a more integrated approach to oversight in the payments sector.

‍

The Financial Lives study presents a sobering view of financial resilience in the UK.

Between 7% and 10% of adults reported having no investible assets, while nearly 30% had assets of less than £1,000 or none at all.
9% of adults said they could cover their living expenses for less than a week if they lost their income, an increase from 7% in 2017.
In 2024, over ten million people carried unpaid credit card balances from month to month.
Over the two years to May 2024, 15.3 million adults applied for regulated credit agreements, up from 12.8 million in the preceding two year period.

‍

The data suggest not only a rise in household indebtedness but also a growing reliance on higher cost forms of credit. Within this context, the proliferation of BNPL services such as Klarna has drawn particular scrutiny. A 2022 report by RFI Global found that 69% of retailers believed BNPL offerings had improved sales, yet concerns persist that many consumers lack the financial literacy to manage such credit responsibly. Regulators are now seeking to forestall the emergence of a new debt bubble.

‍

A Government consultation launched in October 2024 has paved the way for imminent regulation of the BNPL sector. The anticipated framework will likely require BNPL firms to obtain FCA authorisation, conduct creditworthiness checks prior to approving transactions, and provide consumers with protections under the Consumer Credit Act. These measures are designed to accelerate refunds and enforce consistent standards across the sector.

‍

Though still modest in size, the BNPL market is attracting new entrants. One such firm, Qlarifi, recently secured funding for its model of delivering real time credit data to BNPL providers based on consumer transaction histories. By offering richer underwriting data, Qlarifi aims to improve risk assessments and ensure more sustainable lending decisions.

‍

As a result of the coming regulatory shift, firms operating in the BNPL space are expected to increase hiring in risk management and compliance. The introduction of mandatory credit checks alone will drive demand for credit risk professionals, while compliance functions are likely to expand as firms adapt to a more stringent supervisory regime.

‍

All eyes now turn to the Mansion House on 15 July for further details on the future of financial services in the UK.

Share this to your socials:

BNPL to face regulation

sign up to our weekly newsletter