Regulation: an issue of brand and customer experience in the BNPL space

Have you seen ?

The ultimate guide to launching checkout finance

The ultimate guide to launching checkout finance

Regulation of the buy-now-pay-later (BNPL) space, like Winter, is coming and for many providers, will bring with it a flurry of challenges to overcome and avoid being frozen out.


Unregulated BNPL providers have seized the opportunity to deliver credit without being held back by regulation as enterprise merchants relinquished some control of brand experience and the customer journey at the point of sale, and traditional lenders were left out in the cold.


But we stand on a precipice as winds shift and direction changes. As the very real threat of regulation creeps ever closer, new market entrants will be left to get to grips with incoming regulatory frameworks as banks, well seasoned in working within similar frameworks, take the advantage to have their day in the sun.


In addition, retailers looking to reclaim control of their brand and customer experience now have the option to do just that and work with trusted lenders to deliver on the FInancial Conduct Authority’s (FCA) proposed Consumer Duty – a focus on creating better consumer outcomes, particularly for the most vulnerable in society.

As unregulated fintechs, hit by new regulatory frameworks, wrestle to get back in control, lenders can bring their many years of experience, operating with high standards of consumer protection, to retailers.

Brand experience


The rise in popularity of BNPL products was driven by consumers looking to have more value-driven, transparent credit options at the point of sale. 


Further, the pandemic, which drove particular trends in buying towards home improvement, consumer technology and e-commerce, to name a few, accelerated the uptick of retail finance spend, with the new BNPL market entrants reaping the rewards, unchallenged by traditional lenders.


Retailers seeking to give their customers the options they were looking for at the checkout had no choice but to partner with these unregulated lenders, adding their logos to their sites.


But as new market entrants get dragged through the media with claims of irresponsible lending, those retailers that have partnered with these brands need to look to uncouple from a freight that might take them down the track of reputational damage.


This is not only of benefit to the consumer, who sees a brand they trust at the point of sale and can be more secure in their purchase, but also presents the opportunity for banks to build relationships with retailers, where traditional lenders become a far better option to partner with; reputationally and practically.


Customer journey


When retailers partnered with the new generation of fintechs that bring BNPL to their checkouts, there was a lot more at stake than their brand – they also handed over control of a part of the customer journey at the point of sale.


As customers make their payment they are often redirected to the partner’s site where consumer data is collected and customers are shown competitor offers.


In addition, the retailers lose access to that all-important customer data that further supports personalising customer experiences and, ultimately, sales and marketing efforts.


The whitelabel way


Established lenders and enterprise retailers now have a other choices. As regulation of the BNPL space starts to become a reality, new market entrants will be left struggling with how to manage the complexity and update their business model.


For traditional lenders and major retailers, whitelabel offers a better option. As unregulated fintechs, hit by new regulatory frameworks, wrestle to get back in control, lenders can bring their many years of experience, operating with high standards of consumer protection, to retailers – enabling them to deliver responsible lending to their customers and avoid risk to their reputation.


For retailers, whitelabel technology partners not only give back control of the brand experience but also reclaim control of the customer journey and associated data, whilst having the option to partner with multiple established lenders that already operate within a regulated framework.


In turn, the consumer gets the value and transparency they went in search for when seeking BNPL products at the point of sale.


Learn more about BNPL regulation – download our Global BNPL Regulation Report.

Further reading

Share this article

Start lending at the point-of-sale with our whitelabel checkout finance platform

Keep up with checkout finance news and insights

57% of customers have used checkout finance. 70% are thinking of using it this year.

Divido’s latest consumer research report has uncovered essential statistics about the checkout finance and Buy Now, Pay Later industry. Discover everything there is to know about your customers – from how much they want to borrow, to how finance affects their shopping habits.

What's popular right now?

24 October 2023

Divido Calculator upgrade: new look and enhanced functionality

The ultimate guide to launching checkout finance
19 October 2023

The ultimate guide to launching checkout finance

Older man using credit card
12 October 2023

Here’s why checkout finance could overtake credit cards