Buy Now Pay Later today has become a revolutionary solution for consumers looking for quick, flexible payment options at the point of sale.
Today, you can see a drastic growth of the BNPL startups in the fintech industry, with some leading names. You can also be a part of this thriving BNPL landscape by contacting a fintech app development company.
However, you should know that this sector is facing challenges in 2025, like regulatory shifts and evolving risks that BNPL startups must navigate to survive and scale responsibly.
If you read this blog till the end, you will get a deep understanding of the key risks and emerging regulations for BNPL startups in 2025
Let’s get started.
What is BNPL?
BNPL, or Buy Now Pay Later, is a short-term financing option that offers consumers the advantage of purchasing items immediately for interest-free installments. This payment facility is mostly utilised by young customers or tech-savvy users, making it very easy for them to own products without draining their pockets.
With the increasing use of e-commerce websites, this payment criterion has gained good popularity. Purchasers can select and buy products from the online retail sites without paying the full upfront cost, but by just paying a minimum amount at checkout and scheduling an installment for the remaining balance. BNPL is often an interest-free installment choice if payments are made on time.
A customer who chooses to pay via the BNPL option will have to pay only 25% of the purchase price, and the rest can be managed with small down payments. BNPL service is provided to customers after a soft credit check, which doesn’t impact their credit score.
Key risks faced by the BNPL startups in 2025
There are various fintech companies available today that offer the facility of BNPL services to modern customers. Today, with the rising competition, more such startups are arising that provide this facility.
You can also start your BNPL startup since it is so much in demand with the help of the companies that offer BNPL app development services. However, you need to be very careful about the risk that is often faced by the BNPL startups today, and you should know about those risks.
Keeping that in mind, we have listed the potential risks that may be faced by the BNPL startups in 2025.
Rising regulatory oversight
BNPL is operating within the regulatory gray areas, which follow strict credit lending rules. Regulators today are keeping their strict eye on BNPL providers in such areas. In 2025, the government is taking more responsible decisions along with financial authorities around the world. They have taken a joint decision to introduce new frameworks that will help boost transparency, protect consumers, and ensure fair lending. This has made regulatory compliance a top priority for every member in this industry.
Strict credit assessment
The use of BNPL has increased since it offers interest-free installment payments, mostly among the younger customers. This is encouraging overspending, leading to missed payments and accumulating debt. This has led BNPL companies or startups to implement robust credit checks for the lenders. This will reduce default rates and help BNPL startups stop lending to high-risk customers. However, this will slow down the approval process and reduce the convenience that makes BNPL appealing to consumers.
Data privacy and cybersecurity
With the rising online transactions, like BNPL, the risks of data breaches, identity theft, and fraud are also becoming a serious concern. The BNPL startups collect sensitive financial and behavioral data of their users. So, it is crucial for the BNPL startups to invest in top-tier cybersecurity to protect against data breaches and unauthorized access. They must invest in robust cybersecurity infrastructure and encryption, adopt privacy-first data policies, and comply with global data governance laws.
Negatively impact credit scores
Many may not know, but BNPL does have a negative impact on users’ credit scores, which is similar to what traditional lenders do for credit cards or loans. The game is that if the users who have taken advantage of BNPL to make payments of their installments, then it will not hurt their credit score. This can actually make it easier for them to qualify for other financial products in the future, like loans or mortgages. But in case the user misses payments could lead to a drop in credit score.
Risk of reputation
The reputation of BNPL startups is always on the verge of risk, this is because many times users don’t know the negative side of BNPL. Negative charges about consumer debt traps or hidden fees against the BNPL startups can damage trust quickly. As scrutiny grows, so does the reputational risk of being viewed as predatory or irresponsible. So, the BNPL startups should always maintain clear and honest communication with users. Additionally, they should avoid hidden fees or misleading marketing.
Major regulatory changes are expected to be made by BNPL startups in 2025
So, you know about the potential risk that BNPL startups may face in 2025. How about if you get solutions for these risks?
Keeping that in mind, we have listed a few major regulatory changes that can be made by the BNPL startups in 2025.
Mandatory credit assessments
The BNPL startups must conduct more robust credit checks of the users who are availing this service, similar to those done by banks and credit card companies. This double check will help BNPL startups ensure that users have the financial capacity to repay their installments. This additionally helps them to prevent irresponsible lending to high-risk individuals.
Complete registration and licensing
It is best for the BNPL startups to register themselves as regulated financial institutions or lenders. This is the same law under which the credit card providers and banks register themselves. This tactic will bring them under the supervision of financial authorities like the traditional lender and subject them to routine compliance checks, audits, and consumer protection obligations.
Standardise disclosures
It has become crucial for the BNPL startups to be transparent, which is why standardized disclosure has become important. This standardized disclosure must present transparent information to the customer, which includes payment terms, fees & penalties, interest rates, and dispute resolution policies. All these details will help the customers to know first-hand what they are signing up for, which will reduce confusion.
Strengthen data privacy and security standards
With the growing risk of potential cyber fraud, it has become crucial for the BNPL startups to focus on offering data protection to their customers. Today, everyone is opting for stricter data protection regulations that are emerging globally. This has made it very important for the BNPL startups to follow updated laws around how they collect, store, share, and process personal and financial data.
Conclusion
So, you know now the rising popularity of BNPL also comes with rising potential risks. This has made the BNPL startups take serious responsibility.
You know what risks there are for the BNPL startups in 2025 and how they can survive them with the major regulations.
Now is the time for the BNPL startups to thrive in the future of finance by staying ahead of the evolving legal landscape and prioritizing consumer trust.
