PayPal: UK Firms Back BNPL Rules to Boost Trust and Sales

British businesses are highly optimistic about the impending Financial Conduct Authority (FCA) deferred payment credit regulation. 

According to new research from PayPal, which surveyed 1,000 British business owners and representatives, nearly two thirds (64%) believe the new rules will aid their operations by improving consumer trust (59%) and transparency (58%).

Rather than viewing the regulatory shift as a barrier, 49% of firms believe the framework will help them establish a more sustainable long-term business model. Almost a quarter (23%) plan to expand their Buy-Now-Pay-Later (BNPL) offerings after the rules are implemented, anticipating higher quality customers (20%) due to increased consumer confidence, which will subsequently boost conversion and sales (18%).

Managing compliance costs

Despite the overarching optimism, a portion of the market remains cautious. The study highlights that 19% of businesses worry that affordability checks could reduce conversion rates, whilst 18% fear increased legal risk and 16% cite rising compliance costs.

For merchants using third-party providers, the structural setup of these regulations offers a significant advantage. 

Because the compliance burden primarily falls upon the lender rather than the merchant, businesses utilising services like PayPal can mitigate direct regulatory overheads.

Tamer El-Emary, General Manager UK at PayPal, explains: “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 reputation remains a critical benchmark for corporate partners, with the report noting 65% of merchants responded that trust and reputation are their primary considerations when selecting a BNPL provider. However, the data reveals that businesses require active support to navigate the transition successfully.

Out of those surveyed, 65% of merchants want clearer guidance on regulation and compliance from their providers.

The report states that 51% require assistance updating their checkouts and customer journeys, and 49% seek tools to help communicate BNPL options responsibly to customers.

For retail businesses, flexible payment methods have evolved into a core growth mechanism. There is a real emphasis on trust and transparency from merchants using PayPal, as brand reputation backs consumer confidence. 

Corporate partners note that the introduction of formal oversight will make it easier for consumers to commit to larger capital outlays.

Two companies, Pramworld and Farrar & Tanner, provided comment in the report after working with PayPal and its solutions.