UK Merchants Back New FCA BNPL Regulation as PayPal Research Reveals Surge in Consumer Trust

Quick Summary

New research from PayPal indicates that 64% of UK businesses welcome upcoming BNPL regulation from the FCA, viewing it as a catalyst for consumer trust. As rules take effect on July 15, 2026, merchants expect improved transparency and sustainable growth within the digital payments ecosystem.

How Does BNPL Regulation Benefit UK Merchants?

The introduction of a formal regulatory framework for BNPL regulation is being viewed by the majority of British businesses as a strategic advantage rather than a hurdle. According to PayPal’s study of 1,000 business leaders, 59% believe the new rules will strengthen customer trust, while 58% anticipate a significant boost in transactional transparency. By formalizing Deferred Payment Credit, the industry moves away from its "wild west" reputation toward a stable financial product.

• 64% of businesses believe the changes will benefit their operations.
• 49% of respondents see regulation as the key to a sustainable business model.
• 23% of merchants plan to expand their BNPL offerings post-regulation.

What Results Has PayPal Pay in 3 Delivered for Retailers?

For merchants concerned about the impact of BNPL regulation on sales, the data suggests that flexible payment options remain a powerful driver of revenue. PayPal reports that its Pay in 3 service delivers a 129% higher average order value (AOV) compared to standard transactions. This allows consumers to purchase heritage quality items or high-ticket goods without compromising on price, while the merchant receives the full payment upfront.

• 129% increase in average order value via Pay in 3.
• 20% of businesses expect higher quality customers due to increased confidence.
• Zero credit risk for merchants, as PayPal assumes the lending liability.

How Can Businesses Prepare for the FCA Changes?

Preparation for BNPL regulation involves a shift toward clearer communication and responsible lending practices. While third-party providers like PayPal absorb the primary burden of compliance as the lender, merchants are seeking tools to update their digital customer journeys. Approximately 51% of businesses want direct support in refreshing their checkout flows to ensure they remain clear and fair under the new FCA guidelines.

"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." said Tamer El-Emary, General Manager UK at PayPal.

FF NEWS TAKE:

This announcement definitely moves the needle by signaling the end of the "growth at all costs" era for BNPL. By embracing BNPL regulation, PayPal is positioning itself as the safe, compliant choice for SMBs who fear the legal risks of smaller, less-prepared providers. The 129% AOV boost is a staggering metric that proves flexible credit is now a fundamental retail requirement rather than a luxury add-on.