Buy now, pay later came under Financial Conduct Authority regulation in July, when the UK’s rules for deferred payment credit took effect after years of consultation. For the first time, the interest-free instalment plans offered at online checkouts carry affordability checks, standard pre-contract information and access to the Financial Ombudsman Service.
Andy Ellis, chief executive of NatWest Boxed, the embedded finance business owned by NatWest, told The Fintech Times why he thinks the rules matter as much for retailers as for lenders, and what a bank-backed model brings to the market.
Ellis’s argument starts with what retailers gave away when they handed checkout credit to third parties. “What retailers have given up is ownership of an important part of customer relationships,” he said. “When you outsource consumer credit, you aren’t necessarily just outsourcing the lending. In many cases, you are allowing another provider to establish its own relationship with your customer at a really important point in the purchasing journey.”
Those providers, he said, “often go beyond simply facilitating that original transaction for the retailer. They have also developed a monetisation model from building a relationship with the retailer’s customers and marketing other services to them.”
Regulation, in his view, has given retailers a reason to revisit that arrangement. “Retailers have never had a stronger incentive to take ownership of the consumer credit experience,” he said. “This regulation has simply created a natural moment to reassess the previous model.”
The rules themselves centre on affordability and customer outcomes. Ellis described the main concern being addressed as Consumer Duty, the FCA’s requirement that firms deliver good outcomes for customers. Providers must now carry out creditworthiness and affordability assessments, give clearer information before an agreement is signed, and give customers a route to the Financial Ombudsman Service if something goes wrong. “For customers, that should mean greater transparency and stronger, more consistent protections,” he said. “For retailers, it gives them greater confidence and certainty about the standards providers are expected to meet.”
He expects the line between BNPL and other regulated retail finance to blur as a result. “Shoppers will increasingly care less about what a product is called and more about whether it gives them the flexibility, protection and experience they need.”
That shift underpins NatWest Boxed’s own move into the market. The bank-owned embedded finance business already works with UK brands including The AA, Saga and Sainsbury’s, and is adding BNPL to a wider range of lending products. “Retail finance has always been part of our long-term strategy, and the new regulatory framework reinforces the direction the market was already moving in,” Ellis said. “We’re entering a more mature phase where convenience still matters, but so do trust, responsible lending and customer protection.”
He does not present it as a contest between banks and the established BNPL firms. “I think there will continue to be room for different models,” he said. “We were built on regulated banking infrastructure from day one, so regulation isn’t something we’re having to adapt our business model around.”
For retailers, he argues, the opportunity is to treat credit as part of the overall proposition rather than a single button at checkout. “There is no single option that works for every customer at every purchase,” he said. “One customer might want to spread a purchase over a relatively short period, while another purchase might be better suited to a different form of regulated credit.” That, he said, means “offering customers greater choice that keeps the experience embedded within the retailer’s own journey and brand.”
For shoppers, he put the principle simply: “customers should not have to choose between flexibility and protection.” He does not expect flexible payment to go away. “What should change is the confidence customers can have that whichever regulated option they choose, there are appropriate checks, clear information and protections behind it.”
Over the next two years he expects the distinctions between deferred payment credit and other regulated retail finance to become less pronounced from the customer’s point of view, and retailers to think less about product categories and more about outcomes. “It’s not necessarily as simple as winners and losers because different business models will continue to coexist,” he said. “However, the providers that can combine a strong customer experience with trust and responsible lending will emerge as the clear leaders in the market.”
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