Designing a deferred payment service (Buy Now, Pay Later): regulatory requirements

Buy Now, Pay Later (BNPL) deferred payment services are typically offered in case of purchasing a consumer good. They combine elements of payment products and credit products. Both areas are independently subject to national and EU regulations.

The form of BNPL product and its competitive position depends on key regulatory requirements:

• consumer credit: whether BNPL product is subject to consumer credit requirements (e.g., credit score, durable medium, advertising rules, repayment, registration and authorization required by local law, etc.) depends on the fee and commission model adopted
• money laundering: whether pre-contractual verification of a user’s identity (know-your-customer) is required under AML rules depends on whether the relationship established with the customer has the characteristics of an ongoing business relationship
• payment transaction, payment instrument, payment credit: whether the transfer of funds as a result of BNPL constitutes the execution of a payment transaction, requiring permits or entries under the local law, depends on the provisions of the user and acceptor agreements.

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