Buy now, pay later (BNPL) is a payment option that lets a shopper take goods now and pay for them in instalments, or in one go at a later date, through a third-party lender, usually with no interest if every payment is made on time. Klarna, Clearpay and PayPal’s Pay in 3 are the names most UK shoppers recognise.
How buy now, pay later works
The retailer adds a BNPL provider as a payment method at the checkout, next to cards and digital wallets. When a shopper chooses it, the provider runs its own checks, often a soft credit search, and decides within seconds whether to approve the purchase. If it does, the retailer receives the full price, minus the provider’s fee, within a few days. The shopper then repays the provider, typically in three monthly instalments, in four payments a fortnight apart, or in full after 30 days, depending on the plan.
The provider takes on the risk that the shopper does not pay, and charges the retailer for carrying it. That merchant fee is normally a higher percentage than a standard card fee, which is the core trade: you pay more per order in the hope of winning more orders, larger baskets, or both. Providers also supply on-site messaging, such as “or 3 payments of £16.67” under the price on a product page, and several run shopping apps that send their users to partner stores.
Why it matters
For a UK shop selling items in the £50 to £1,000 range, such as clothing, furniture, beauty or electronics, BNPL can lift conversion and average order value, because splitting a £240 coat into three payments of £80 makes it feel within reach. Whether it pays for itself depends on your margins, your return rate and how many of those sales would have happened anyway.
The regulatory change matters more. For years most interest-free BNPL agreements sat outside consumer credit regulation through an exemption. The government legislated to bring this “deferred payment credit” under the Financial Conduct Authority, and set 15 July 2026 as the date FCA regulation would begin. Check the FCA’s own pages for the rules as they now stand, because the detail affects what you are allowed to say.
Once a product is regulated credit, promoting it can count as a financial promotion. That can include the instalment line in a Google Shopping ad, a Meta ad saying “spread the cost”, and the message under the price on your product page. The CAP Code already requires ads not to mislead, which for BNPL means being clear that it is a form of borrowing and that missed payments have consequences.
Common mistakes
- Writing your own BNPL wording in ads and emails instead of using the provider’s current approved messaging, which is the version it has checked against the rules.
- Describing BNPL as “free”, “no cost” or anything else that hides that the shopper is borrowing.
- Aiming instalment-led ads at people likely to be stretched already, such as students or shoppers in the January sales. It invites complaints and scrutiny.
- Judging BNPL on conversion rate alone and ignoring the merchant fee, which can wipe out the margin on low-value orders.
- Leaving old instalment figures on product pages after a price change, so the message no longer matches the price.
How to act on it
Start with the numbers. Compare the provider’s fee with your margin per order, and run BNPL for a full trading period before deciding whether it earns its place. Record it as a separate payment method in your analytics so you can compare order value, return rate and repeat purchase with card orders, rather than relying on the provider’s own uplift claims.
Then audit every place BNPL is mentioned: product pages, the basket, ads, emails, social posts and influencer briefs. Replace hand-written lines with the provider’s approved wording and check that each ad points to a page where the terms are easy to find. If your Shopping feed or catalogue ads add instalment text automatically, check that too. When I run Facebook and Instagram ads for online shops, BNPL claims in ad copy are something I agree with the client in writing, not something to test casually.