From 15th July 2026, lenders will need to be authorised by the FCA to provide BNPL.
Although the FCA will provide pre-application support to firms to help them get ready, planning must start now.
In our latest blog post, we explore what's changing, and how you can ensure you're ready for the new regulation.
BNPL Regulation Changes 2026
With the Financial Conduct Authority (FCA) bringing Buy Now Pay Later into full regulation from July, time is short. Several years in the making, but not simply a policy update, this structural shift impacts how short-term credit will be originated, assessed, serviced and, ultimately, collected.
Firms that treat this as a late-stage compliance exercise risk failure. Discovering too late that your data, segmentation, customer journeys and recovery playbooks are no longer fit for purpose will impact operations and profits.
This is a case of ‘when’ not ‘if’.
Arum’s Prediction of Key Customer Behaviour Changes and Their Impact
We know that the introduction of mandatory affordability assessments will fundamentally change portfolio composition:
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a proportion of existing BNPL users will fail future checks.
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some will migrate to credit cards or other revolving products
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others will reduce borrowing entirely
The result?
A reshaped risk curve, altered arrears timing, and different vulnerability characteristics entering collections queues.
To mitigate your risk, these three things must happen:
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Re-engineer your collections strategy around affordability intelligence
Collections strategies built on historic repayment behaviour will not be sufficient. You need to model forward. How will tighter underwriting alter arrears volumes? Will early-stage delinquencies fall while late-stage balances increase? Scenario planning should already be underway, using refreshed segmentation logic aligned to regulated affordability standards.
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Embed earlier engagement triggers
If affordability checks are happening at point of sale, collections must not wait until traditional delinquency milestones to act. Proactive, insight-led contact strategies - informed by transaction patterns and income signals - will separate firms that stabilise performance from those reacting to arrears after the fact.
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Upgrade analytics to anticipate stress, not just measure it
The shift toward regulated BNPL will demand stronger evidence of fair treatment and sustainable outcomes. Analytics should now be capable of identifying emerging financial strain before it crystallises into default. That means integrating affordability data, vulnerability markers, behavioural signals and macro indicators into decisioning frameworks.
Looking Further Afield
Globally, there is a broader context at play. As regulators, including the Consumer Financial Protection Bureau in the US, scrutinise short-term credit models, the message is clear: transparency, affordability and consumer protection are no longer optional differentiators, they are baseline expectations.
The uncomfortable question is this: if your collections framework was designed for a lightly regulated BNPL environment, is it robust enough to withstand FCA scrutiny?
But this is more than compliance. It is a test of operational maturity.
Organisations that act now can redesign collections into an advanced, intelligent, consumer-aligned function that protects both performance and brand. Conversely, those that delay may find themselves navigating conduct risk, increased complaints, and volatile recovery curves at the same time.
So here are your key questions:
- Is your data infrastructure ready to evidence affordability and fair outcomes?
- Have you modelled how regulated BNPL will reshape arrears timing and risk segmentation?
- Do your current collections journeys stand up to regulatory scrutiny?
- And critically, are you preparing proactively, or waiting to react?
If you can't answer those questions, perhaps we can help. Find out today by booking a free call.
Proactivity is key, and early engagement and affordability insights will be critical to support compliance, minimise harm, and maintain portfolio performance.
At Arum we know that data driven collections underpin the understanding borrowers’ affordability. This allows teams to design smarter, fairer, and more sustainable repayment approaches.
We've already started preparing, and can help you do the same.
About the author
Walter Mather
Lead Consultant
Walter is a senior financial management, operations, and strategy professional with over 30 years of experience in the banking and collections industries. He has held senior roles across the full credit lifecycle, excelling in operational, strategic, and technical aspects. With expertise in change management, strategy, and analytics, he has led large teams, managed multi-million value debt portfolios, and delivered major transformational programs. Walter has also worked in the insolvency sector, implementing new operating models and outsourcing functions across multiple countries.