The BNPL boom is slowing—new rules may be to blame

The "buy now, pay later" (BNPL) boom promised a smarter, simpler way to pay—zero interest, no hard credit checks, and quick approvals at checkout. For millions of users, it felt like the credit card’s cooler, more transparent cousin. But regulators are starting to see things differently.

From Washington to London, authorities are proposing sweeping changes that could force BNPL services like Klarna, Afterpay, and Affirm to operate more like traditional lenders. If adopted, these new rules would introduce stricter underwriting, standardized disclosures, and more consistent treatment of late payments and disputes.

What looked like frictionless fintech is being reclassified—as real credit, with real risk. For everyday users, this marks a turning point. And for the companies built on split-pay convenience, it may trigger a full-scale overhaul of their business model.

The urgency comes from usage patterns that have outgrown the original intent. BNPL started as a way to break up purchases—often under $200—into interest-free installments. But today, it’s routinely used to finance essentials like groceries and fuel, particularly among younger users and lower-income households. That shift is what raised red flags.

In 2023, the U.S. Consumer Financial Protection Bureau (CFPB) found that BNPL users were more likely to exhibit signs of financial distress—such as overdraft fees, missed credit card payments, or falling behind on utility bills. In response, the CFPB proposed that BNPL providers be subject to the same federal rules as credit card issuers, including:

• Clear interest and fee disclosures
• Standardized dispute resolution processes
• Credit checks prior to loan approval

The U.K.'s Financial Conduct Authority (FCA) is moving in a similar direction, calling for tighter affordability checks and prohibiting misleading advertising that frames BNPL as cost-free.

Put simply: if BNPL behaves like credit, it will be regulated like credit.

For many consumers, BNPL didn’t feel like debt. It felt like budgeting—with benefits. You could split up the cost of a phone case, a gym membership, or a new work outfit without triggering interest charges or dipping into savings. The payments were small, the process was fast, and there were few barriers to entry. But that mindset may now need to change.

If new regulations are passed, BNPL products will likely become more structured and harder to access. Expect longer approval times, potential rejection due to poor credit scores, and more formality around fees and repayment terms. This transforms the user experience from “tap and go” to “apply and wait.” And while that might feel inconvenient, it also prompts a necessary question: was it ever really sustainable to finance non-essentials with zero vetting?

A Three-Bucket Framework to Rethink BNPL Use

If you’ve used BNPL regularly—or are considering it in the future—it’s worth mapping your purchases against a basic three-bucket model:

1. Survival Spending
   Essentials like food, rent, and medicine. These should never be financed with short-term loans, even if offered at zero percent interest. It’s a signal that your budget may need structural revision.
2. Cushion Credit
   Occasional or planned buys—like school supplies, holiday travel, or car repairs—that are paid off in weeks. This bucket assumes repayment capacity is predictable and immediate.
3. Future-Building Investments
   Tools or expenses that align with long-term goals, like professional certifications or setting up a home office. If BNPL is used here, it should be part of a broader plan with fallback liquidity.

Most regulatory concern lies in users relying on BNPL for the first bucket—day-to-day living costs. That’s where affordability risks are highest, and repayment discipline can easily unravel.

Even before these rules are finalized, it’s smart to ask a few personal finance questions:

• Can I comfortably repay this within the stated term—without juggling multiple BNPL loans?
• Would I still make this purchase if I had to pay the full amount upfront?
• Is this financing tool helping me control my budget, or quietly increasing my monthly obligations?

If your answers lean toward uncertainty or avoidance, it may be time to reconsider the reliance on installment-based tools altogether.

These new rules won’t just affect consumers. They could fundamentally reshape how BNPL providers operate. Today, many BNPL companies monetize by charging merchants a percentage of each transaction—typically higher than credit card processors. In return, they boost conversion rates at checkout and offer a perceived value-add for customers.

But once compliance costs rise—due to credit checks, disclosure systems, and regulatory reporting—those margins may shrink. This could lead to:

• Fewer interest-free offers
  Companies may start charging interest or late fees more transparently to offset costs.
• Lower approval rates
  Consumers with thin credit files or high existing debt may be filtered out.
• Consolidation or exits
  Smaller BNPL firms may struggle to meet compliance burdens, leaving only larger players in the game.

It’s a maturity moment for the industry. And it signals that the era of “growth at all costs” is giving way to a more sustainable, regulated approach.

The prospect of tighter rules can sound intimidating. But this isn’t a crackdown—it’s a clarification. BNPL is still a legitimate tool. But like any financial product, it needs to be used consciously, with context. If you're already carrying multiple BNPL obligations, this may be a good time to consolidate them or pay them off early. If you're considering new purchases, ask yourself whether they fit into your broader financial picture—not just your immediate spending comfort.

More transparency and oversight means more tools to help users stay in control. And that’s the long-term goal: less confusion, fewer hidden costs, and a clearer path toward financial resilience.

What made BNPL so popular—its convenience—was also what made it risky. In financial planning, friction isn’t always a flaw. Sometimes, it’s a checkpoint. The new rules on buy now pay later loans may slow things down. But they also invite better habits, better disclosures, and better alignment between what you can afford and what you choose to finance.

That’s not life support. That’s long-term health.