How retail finance is evolving beyond BNPL

BNPL’s role in the story

Buy Now Pay Later transformed the retail payments landscape. By making short-term, interest-free deferral feel frictionless, it brought a generation of consumers who had avoided traditional credit into the world of point-of-sale finance. By 2024, around one in five UK adults held a deferred payment credit (DPC) agreement - the official term for what most people call BNPL - according to the Financial Conduct Authority.

That rapid uptake was significant. But it also obscured something important: BNPL was always one part of a broader retail finance ecosystem, not a replacement for it.

The products that predated BNPL, such as interest free credit, interest bearing credit, longer-term instalment finance, never went away. In many sectors they remain the dominant tools. And as the market matures and regulation reshapes the landscape, more retailers are returning to a fundamental question: which finance products actually suit the way our customers buy?

What comes after BNPL dominance

BNPL grew quickly because it was simple, quick to integrate, and largely unregulated. That combination lowered the barrier to entry for retailers who had never offered finance before. For many, it served as an entry point - a way to test whether customers responded to flexible payment options at all.

The answer was clear: they do. Research from Novuna Consumer Finance shows that customers using point-of-sale finance spend up to 166% more than those paying upfront, and 53% of customers say they would not have made their purchase without various finance options being available.

But simplicity has limits. BNPL is typically structured around short-term deferral, often a period of months, which suits lower-value or impulse purchases well. For a customer financing a new sofa, a kitchen renovation, or a set of hearing aids, a longer repayment window with predictable monthly instalments is often a more appropriate fit. This is where interest free credit and interest bearing credit come into their own.

The shift we are now seeing is less about BNPL declining and more about retailers gaining a more sophisticated view of their finance offering. BNPL expanded awareness of flexible payments. The next phase is using that awareness to guide customers towards the right product for their purchase.

The finance mix that works for retailers today

Successful retail finance strategies in 2026 are not built around a single product. They are built around the purchasing behaviour of a specific customer base, and the different motivations that drive a transaction.

Interest free credit
Interest free credit remains the most popular finance product among UK shoppers. At Novuna, over 65% of retail finance sales are interest free. The appeal is straightforward: customers pay exactly what the product costs, spread over fixed monthly instalments, with no additional charges. For retailers, subsidising the interest is a cost - but one that consistently drives higher conversion rates and larger basket sizes. For high-consideration purchases, interest free credit removes the psychological barrier of making something more expensive than it needs to be.

Interest bearing credit
Interest bearing credit works differently and suits a different context. Rather than the retailer absorbing the cost of interest, the customer pays a fixed rate over a longer term. This can make finance broadly cost-neutral for the retailer, and it opens up longer repayment periods, making it particularly appropriate for higher-value purchases where spreading cost over 36, 48, or 60 months is the only realistic option for the customer. It is also an important tool for sectors where average order values mean the subsidy model of interest free credit would be prohibitively expensive.

BNPL
BNPL still plays a genuine role, particularly where customers want to defer rather than spread payment - for example, securing an item ahead of delivery or aligning repayment with a specific date. It works best as one option within a wider suite, rather than the only option available.

Deferred interest finance
Deferred interest finance adds another layer for retailers who want to offer a promotional structure - for instance, 12 months’ deferral followed by a fixed repayment period. This can be effective for seasonal campaigns or high-consideration categories where customers may want time before committing to repayments.

The common thread is that each product serves a distinct purchasing psychology. Retailers who understand those distinctions, and who offer appropriate products across different transaction types, are better placed to convert browsers into buyers at every price point.

How regulation is reshaping the landscape

The July 2026 implementation of FCA regulation for deferred payment credit is the most significant structural change to retail finance in a generation. For the first time, BNPL providers will be required to carry out affordability checks, provide clear terms and conditions, and meet the same consumer protection standards that have long applied to regulated credit products.

This matters for retailers in two ways.

First, it levels the playing field. Regulated products like interest free credit and interest bearing credit have always been subject to FCA oversight - including affordability assessments and clear disclosure requirements. The informal competitive advantage that unregulated BNPL held on simplicity and speed is narrowing.

Second, it changes how retailers need to think about their finance offering. Retailers who have relied solely on unregulated BNPL will need to review their setup to ensure continued compliance. Those already working with FCA-authorised providers, or who have taken appointed representative status themselves, are better positioned to navigate the transition without disruption.

For retailers exploring their options, the regulatory environment also offers an opportunity: customers increasingly understand the distinction between regulated and unregulated products, and the trust signals that come with regulated finance are becoming a genuine differentiator.

Why the most successful retailers think beyond a single product

One of the clearest patterns we see across Novuna’s 3,000+ retail partnerships is that the businesses generating the most from finance are not those who offer one product, they are those who think about their finance strategy in the same way they think about their product range or pricing architecture.

That means asking different questions:

• What is the average transaction value in our category, and how does that affect which finance products are appropriate?
• Are our customers making planned, considered purchases or more spontaneous ones - and how does that affect what they need at the point of sale?
• Are we currently losing customers who want longer repayment terms than our BNPL product allows?
• Do we have the right finance options available for both online and in-store journeys?

The emergence of BNPL was valuable because it pushed these questions onto the retail agenda. The maturation of the market - driven by regulation, growing customer familiarity with finance, and the data retailers now have on their own finance performance - means those questions can be answered with much more precision than before.

Retail finance has moved from being a feature to being a commercial strategy. The retailers treating it as such are seeing the results.

Novuna Consumer Finance works with over 3,000 UK retailers, offering interest free credit, interest bearing credit, and Buy Now Pay Later solutions tailored to your sector and customer base.

View our retail finance options