In recent years, the digital payments sector has seen the rise of a highly innovative segment: Buy Now Pay Later (BNPL). Conceived as a leaner and more flexible alternative to traditional consumer credit, this payment method quickly gained the interest of consumers, businesses, and regulators.
Buy Now Pay Later: what it is and why it grew by 46% in one year
Buy Now Pay Later is a form of payment deferral that allows customers to make an immediate purchase and split the amount into several interest-free installments, with an instant assessment process.
According to the latest data from the Politecnico di Milano Observatory, BNPL reached €6.8 billion in transactions in Italy, with year-on-year growth of 46% (2024). The main driver of the market is e-commerce, which accounts for 77% of the total.
The Birth and Evolution of BNPL
The phenomenon originated in the fintech world, with operators building their business model around it.
The underlying idea is as simple as it is revolutionary: shifting consumer credit from a bureaucratic process to an immediate digital service, directly integrated into online checkout and, progressively, also in physical stores through POS systems. In the context of composable software architectures, BNPL becomes a plug-and-play component: an API that merchants can integrate into their sales flow without needing to redesign their entire infrastructure.
Buy Now Pay Later: Why Consumers and Merchants Like it
So how did we reach €6.8 billion in transactions in Italy alone? At least two factors support the success of the BNPL model:
- Minimal friction: no paperwork, no complex assessments, invisible credit checks;
- Perceived greater accessibility: paying in three or four interest-free installments makes even small to mid-sized purchases more manageable, increasing perceived spending capacity.
For merchants, the appeal is just as strong. Although BNPL operates on the principle that the seller pays for the service, by paying a commission to the provider of the technological infrastructure, the increase in conversion rates and the rise in average order value have significantly accelerated its adoption. In other words, the trade-off is compensated by a better purchasing experience and a competitive advantage over retailers who do not offer flexible payment alternatives.
BNPL risks capture the regulator’s attention
The boom in BNPL was also driven by the regulatory gap in Directive 2008/48/EC on consumer credit, which was not designed for this type of service. The lack of regulation allowed many fintech operators to enter the market rapidly, capturing demand without being subject to the obligations of supervised intermediaries.
The market, therefore, expanded rapidly, generating access and innovation benefits, but also risks:
- Invisible over-indebtedness
Customers can make multiple installment purchases with different operators without a proper creditworthiness assessment. From the operator’s perspective, there is no visibility into the consumer’s overall exposure. - Poor informational transparency
BNPL is usually presented as a payment method, without standard consumer credit disclosures and with limited visibility of penalties and delays. - Distorted perception of debt
The speed of the process and the installment option, even for asmall amounts, potentially lead to underestimating the financial commitment, encouraging impulsive spending. - Unaligned data and debt collection
The absence of reporting, incomplete risk assessments, and collection practices not always consistent with regulatory standards create an overly fragmented ecosystem.
All of this prompted the European legislator to intervene, updating the regulatory framework with the Consumer Credit Directive 2 (CCD II), designed to fill the gaps in the existing legislation.
CCD II: what it is and its impact on Buy Now Pay Later
The Consumer Credit Directive II, formally Directive (EU) 2023/2225, organically updates the European consumer credit framework, extending the scope also to digital models developed in recent years, such as Buy Now Pay Later.
The aim is to strengthen consumer protection and standardize rules between traditional financial operators and non-financial entities. The Directive is currently being transposed in Italy and will repeal the previous legislation starting November 20, 2026, when the new provisions will fully apply.
The main innovations of the European Directive for BNPL
CCD II brings a significant change to the scope of consumer credit by including financing under €200 and payment deferrals typical of BNPL. Considering that 79% of installment-based transactions fall below €300, the majority of what was previously managed as an alternative payment method is now fully categorized as regulated credit.
For operators, this means a direct extension of the obligations typically imposed on traditional consumer credit. Among the main requirements:
- Full consumer disclosure, both in advertising and in the pre-contractual phase. Operators must clearly indicate any costs, conditions, rights, etc.
- Formal assessment of creditworthiness and consumer solvency.
- Inclusion within the supervisory perimeter of the competent authority, requiring the adoption of processes and controls consistent with regulatory standards.
- Digital contract signing via electronic signature.
The obligation to formalize the contract, along with the application of stamp duty, may reduce the convenience of BNPL solutions for low-value transactions.
The Impact on Financial and Non-Financial Market Players
The Directive does not affect all players equally: banks and already supervised intermediaries largely possess the required safeguards and will mainly need to update procedures and disclosures.
For non-financial entities, however, the transition is and will be more profound: moving from a lean, lightly regulated model to a fully regulated framework entails new operating costs, more structured processes, and, in some cases, a revision of the business model.
Regulated BNPL: Can the user experience remain the same?
BNPL was born and grew thanks to a one-click experience, both online and in-store, but CCD II introduces obligations that risk transforming a simple flow into a rigid and bureaucratic process.
For operators offering digital payment deferral services, the challenge is therefore to integrate disclosures, creditworthiness assessments, digital contracts, and compliance controls into their solutions without undermining the experience that made the model so competitive.
The key concept is precisely user experience: is it possible to ensure it remains unaffected, or affected only in an acceptable way, by the new requirements? How can players stay compliant and competitive at the same time?
From our perspective, the answer lies in technological innovation, not understood as the choice of a specific language but as the adoption of a structured approach that enables handling regulatory complexity while preserving an agile and modern UX. This approach is based on four pillars:
End-to-end Vision
Compliance cannot be achieved simply by adding a disclosure or a signature module: the entire journey must be redesigned, from the pre-contractual phase to credit assessment and contract archiving, ensuring consistency among components.
Integration
BNPL platforms must communicate with credit information systems, digital signature modules, internal controls, and external services. To do so, they need open, API-first architectures that can integrate with both internal solutions and third-party components. Not adhering means a slower ability to respond to regulatory requirements and market needs.
Modularity
Innovation means modularity, designing the platform as a set of reusable and independent components that can be updated or replaced without intervening on the entire system. This approach guarantees the flexibility needed in the event of future regulatory or operational changes.
Innovative Technologies
A modern tech stack allows for high performance, smooth UIs, and robust processes even in the presence of stricter requirements. Multi-platform frameworks, reactive architectures, reusable components, and advanced development tools help balance speed, quality, and compliance.
The role of Kirey in transforming the financial sector
Supporting financial operators means helping them turn regulatory changes into growth levers. When legislators introduce new requirements and make it necessary to review processes, operating models, and digital platforms, at Kirey, we manage the entire transformation journey.
We can do so because we combine two complementary dimensions: solid technological expertise, which has always been our core, and an in-depth understanding of the financial market, with its dynamics, priorities, and constant need to balance user experience, innovation, and compliance.
Contact us to learn how we can support you in this evolution journey.
