PayPal: FCA BNPL Rules to Boost Trust and Sales

British businesses are expressing strong confidence in the forthcoming Financial Conduct Authority (FCA) regulation of deferred payment credit.

New research from PayPal, based on a survey of 1,000 UK business owners and representatives, finds that close to two-thirds (64%) expect the incoming rules to support their operations, largely by strengthening consumer trust (59%) and improving transparency (58%).

Rather than seeing regulation as a constraint, nearly half (49%) of respondents believe it will help underpin more sustainable long-term business models.
Meanwhile, 23% plan to broaden their Buy-Now-Pay-Later (BNPL) offerings once the rules take effect, anticipating better-quality customers (20%) driven by stronger consumer confidence, which in turn is expected to lift conversion rates and sales (18%).

Managing compliance costs

Despite the overall positive sentiment, some concerns remain.

The findings show that 19% of businesses fear affordability checks could negatively impact conversion rates, while 18% point to increased legal risk and 16% highlight the burden of higher compliance costs.

However, for merchants working with third-party providers, the regulatory structure presents clear benefits.

As the responsibility for compliance largely sits with lenders rather than merchants, businesses using platforms such as PayPal can limit their direct exposure to regulatory complexity.

Tamer El-Emary, General Manager UK at PayPal, says: “For businesses providing Pay in 3, there is no disruption and no action required. We’ve long shared our support for proportionate BNPL regulation and, like the British businesses we’ve heard from, believe it will help strengthen confidence in the payment category while supporting long term, sustainable growth. 

“We are well prepared for the new requirements, with many of them reflecting practices we've had in place for some time, so we don’t expect to see any changes in our conversion rates.”

“It’s a great opportunity for merchants; our Pay in 3 service has a 129% higher average order value than standard PayPal transactions – there’s a payment option that can help drive growth without adding credit risk to your business.”

Demand for provider support

Brand credibility continues to be a defining factor in partner selection, with 65% of merchants citing trust and reputation as their top priorities when choosing a BNPL provider.

However, the research also underscores the need for hands-on support as businesses adapt to the new regulatory environment.

Among those surveyed, 65% said they want clearer guidance from providers on regulatory and compliance requirements.

Additionally, 51% need support updating checkout processes and customer journeys, while 49% are looking for tools to help communicate BNPL options responsibly.

Creating a seamless customer journey remains essential as merchants pursue sustainable growth.

Speaking exclusively to FinTech Magazine, Tamer adds: “A frictionless checkout experience is fundamental to sustainable growth because every additional step is another opportunity to lose a customer.

“As BNPL enters a regulated era in the UK, merchants are increasingly looking for payment experiences that are simple, trusted and transparent.

“That’s reflected in our research, where 65% of businesses say trust and brand reputation matter most when choosing a BNPL provider.

“For businesses offering PayPal Pay in 3, merchants receive payment upfront while PayPal manages the credit risk, making it easier to offer customers greater payment flexibility through a trusted checkout experience already used by more than 30 million UK consumers.”

For retailers, flexible payment methods have evolved into a central driver of growth. Trust and transparency remain key, with PayPal’s brand strength helping reinforce consumer confidence.

Industry participants also note that formal regulatory oversight is likely to encourage consumers to commit to higher-value purchases.

The report also includes insights from two businesses, Pramworld and Farrar & Tanner, following their experience working with PayPal and its solutions.