Buy now pay later
An alternative financial method and its future
Buy Now Pay Later (“BNPL”) is a type of payment that has become widespread in North America, Australia and Europe, which allows the price of the product / service to be postponed for certain periods of time or divided into certain maturities. BNPL is a financing model that enables the immediate purchase of goods and services and payment at a later date. BNPL allows buyers to manage their cash flow while procuring products and offers flexibility to consumers, often with low interest or interest-free options.
BNPL eliminates the requirements associated with traditional credit checks or credit cards, making it available to a wider range of consumers regardless of their credit history. During the payment process, BNPL plans require a soft credit check which, as a general rule, does not affect the consumer’s credit score or rating. As a result, BNPL offers opportunities for individuals who are excluded from traditional financing options.
- Current ratios
As BNPL model is one of the fastest-growing payment methods in Europe’s e-commerce market, studies indicate that BNPL will account for 11% of the European e-commerce market by 2025, reaching an estimated market size of €300 billion[1]. Countries such as Sweden, Germany, Norway, and Finland lead the trend, while in the UK, BNPL accounted for 12% of online transactions in early 2023. The European BNPL market is projected to grow at a compound annual growth rate (CAGR) of 11.4% between 2023 and 2028, driven by increased e-commerce penetration and consumer demand for flexible payment solutions.[2]
In Türkiye, BNPL usage is less widespread compared to Europe but is growing rapidly alongside with the expansion of e-commerce. Younger, tech-savvy consumers are driving its growth. Reports from the Interbank Card Center (also known as BKM) show that digital payment systems, including BNPL, are increasingly integrated into Türkiye’s retail and e-commerce ecosystems.[3]
2. European Union legislation
The European Union Consumer Credit Directive (“Directive”) adopted by the Council of the European Union was updated on October 30, 2023. This update specifically expanded the scope of BNPL services. The new regulation aims to ensure stricter oversight, greater transparency, and enhanced consumer protection.
With this change, BNPL services are now considered consumer credit and subject to specific disclosure obligations and information requirements. This ensures that BNPL payment options are presented more clearly and transparently to consumers.
As a result, EU member states are expected to revise their national regulations and supervision of BNPL services to align with these new standards.
This Directive focused on consumer protection and offered a credit check requirement for small loans of less than 200 Euros. With the Directive, loans taken out via digital payment methods, such as BNP will be subject to a credit check.
3. The legal framework in Türkiye
In Türkiye, BNPL is not regulated by any specific legislation. Therefore, each application shall be considered case by case. In BNPL applications, a credit facility is extended to the purchaser, either through instalment payments or deferred payment. The party conducting this instalment or deferral is either the seller/supplier or a financial institution authorized to extend credit. Based on the identity of the financing provider, the BNPL applications will differ as follows:
- Financing Agreement: In the event an instalment payment or deferred payment service is provided by a financing company, the agreement will be classified as a financing agreement. However, it must be emphasized that extending financing without legal authorization, except by a financing company, is prohibited. Such a case may be deemed as “Unauthorized Activity”, a criminal offense.
- Sales Agreement in Instalments: In the event the service provider is the seller or supplier, the agreement will be classified as a sales agreement in instalments. If the transaction targets consumers, Consumer Protection Law will apply; otherwise, Turkish Code of Obligations provisions will. There is no restriction on the seller or supplier selling their own goods or services in instalments.
- Consumer Loan Agreement: In the event the service is provided by a bank and falls within the scope of a consumer transaction, the BNPL agreement will be classified as a consumer loan agreement, and the provisions of the Consumer Protection Law will apply. Conducting such activities by parties other than banks may also constitute the offense of “Unauthorized Activity”. If the transaction does not qualify as a consumer transaction, it will be classified as a cash loan agreement.
Since BNPL services are primarily provided by financial companies, they may fall under the scope of the Law No. 6361 on Financial Leasing, Factoring, and Financing Companies (“Law No. 6361“) and the Regulation on the Establishment and Operating Principles of Financial Leasing, Factoring, and Financing Companies (“Regulation“). Therefore, a company providing BNPL services shall perform its obligations under the relevant legislation and obtain establishment and operating permission from the Banking Regulation and Supervision Agency (“BDDK”). The Türkiye Fintech Guide, published by the Presidency of the Republic of Türkiye’s Financial Office, also indicates that the BNPL business model in Türkiye is applied by banks and financial companies in accordance with Law No. 6361 and the Regulation.
As of 2024, the BDDK in Türkiye has maintained its restrictions on the terms for consumer loans, including BNPL services. The maturity limits set for consumer loans are as follows:
- For loans between TL 50,000 and TL 100,000, the maximum maturity is 24 months.
- For loans exceeding TL 100,000, the maturity period is capped at 12 months[4]
In the context of BNPL services, Know Your Customer regulations play a significant role in preventing financial crimes such as money laundering and the financing of terrorism. The Regulation on Measures to Prevent Money Laundering and the Financing of Terrorism, issued by the Ministry of Treasury and Finance and supported by Financial Crimes Investigation Board (“MASAK”), requires the institutions to verify customer identities for transactions above TL 185,000 and the threshold for electronic transfers requiring identity verification is TL 15,000.
4. Differences between the European Union and Türkiye
BNPL transactions in Türkiye and the European Union differ significantly in terms of regulatory frameworks, consumer protection, and the parties involved in financing. In Türkiye, BNPL services are not defined under Turkish law and, as explained above, are accepted as different type of agreements on a case-by-case basis. In contrast, the Directive provides a more harmonized and stringent regulatory environment across EU member states, with enhanced transparency and consumer protection requirements. While BNPL services are typically offered by banks, financial institutions, or payment service providers in both regions, the EU imposes stricter oversight and consumer rights, ensuring that transactions are transparent and that consumers are well-informed. Furthermore, while the supervision and enforcement of BNPL practices are relatively more flexible in Türkiye, the EU ensures greater consistency and compliance across its member states. Consequently, although both regions regulate BNPL transactions, the EU framework offers more robust consumer safeguards and regulatory uniformity.
5. Projections
The worldwide BNPL market size is expected to reach USD 160,700,000,000 by 2032. Europe is expected to grow the fastest during the forecast period.[5]
The BNPL market is rapidly growing, extending its reach to new regions and demographics, making it more accessible to consumers globally. This expansion is largely driven by the growth of e-commerce and the increasing adoption of BNPL due to its convenience. Technological innovations will continue to shape the future of BNPL, with new features and integrations expected to enhance the user experience. As the market evolves, regulatory authorities are beginning to take a more active role in ensuring responsible lending practices and consumer protection
Even if some sources indicate that BNPL is trending and its use will increase, certain reports suggest a decline in their usage in specific areas. This is due to several challenges:
- Regulatory Scrutiny: Many governments are introducing tighter regulations to address concerns about consumer debt, transparency, and financial stability. For instance, the UK’s Financial Conduct Authority (FCA) has proposed measures to align BNPL practices with stricter consumer protection rules. These regulations, while necessary, may discourage some providers from operating in these markets, reducing availability[6]
- Rising Interest Rates and Inflation: Economic pressures, including higher interest rates and inflation, make BNPL services less attractive. Consumers are becoming cautious about taking on additional debt, while merchants face higher operational costs associated with offering BNPL options.
- Decline in Approval Rates: As prime borrowers (considered to be a below-average credit risk) is considered likely to make loan payments on time and likely to repay the loan in full, many BNPL providers prioritize prime borrowers, leading to high credit approval decline rates—sometimes up to 70% in certain demographics. This leaves many potential users excluded and diminishes overall consumer satisfaction[7].
- Concerns Over Consumer Debt: Critics argue that BNPL can encourage overspending, particularly on non-essential items, which can exacerbate financial difficulties for some users[8].
6. Expectations of Market Players
Global expectations for the BNPL market indicate continued growth despite recent regulatory challenges. The landscape is shifting as regulatory scrutiny intensifies, particularly in Europe. New measures, such as the European Union’s Consumer Credit Directive 2 (CCD2), have introduced stricter requirements for creditworthiness assessments, transparent marketing, and consumer protection, aiming to curb over-indebtedness and ensure responsible lending. This regulatory tightening has led to a slight slowdown in BNPL adoption in some regions, as companies adjust to the evolving legal framework.
In light of these challenges, we are of the opinion that, integrating comprehensive credit checks to assess a customer’s repayment capacity is crucial for the BNPL providers. Additionally, transparency in marketing and clear communication of terms, including interest rates and potential penalties, will help rebuild consumer trust. Providers should also enhance consumer education regarding the long-term costs of BNPL services to avoid financial overextension. By aligning with global regulatory trends and focusing on consumer protection, BNPL companies can continue to thrive
[1] Key European BNPL Insights Report 2023 https://satchel.eu/
[2] BNPL Trends and Risks repory of Deloitte, https://www2.deloitte.com/tr/en.html
[3] BNPL report of BKM
[4] BDDK decision, https://www.bddk.org.tr/Duyuru/EkGetir/948?ekId=821
[5] Article by Spherical Insights “Global Buy Now Pay Later Market Size, Share, and COVID-19 Impact Analysis, By Channel (Point of Sale (POS), Online), By End user (BFSI, Consumer Electronics, Fashion & Garment, Healthcare, Retail, Media & Entertainment, Others), By Enterprise Type (SME, Large Enterprises), and By Region (North America, Europe, Asia-Pacific, Latin America, Middle East, and Africa), Analysis and Forecast 2022 – 2032”
[6] Asic wants purview on BNPL: Likely to İssue Standalone Guidance, www.financemagnates.com
[7] Even if some sources indicate that BNPL is trending and its use will increase, Forbes, https://www.forbesindia.com/article/post-zestmoney-closure-finding-peace-with-bnpl-credit
[8] Addressing Buy Now Pay Later Risks Effectively, Deloitte, https://www2.deloitte.com/us/en/pages/advisory/articles/buy-now-pay-later-risk.html
