The buy now, pay later industry is in the middle of its most significant strategic pivot since the sector emerged as a mainstream consumer finance product. Following a wave of regulatory action across multiple jurisdictions, BNPL firms are restructuring their business models, diversifying their revenue streams, and in some cases, fundamentally rethinking what they sell and to whom.
The regulatory pressure has been building for years but reached a tipping point in 2025. The UK’s Financial Conduct Authority finalized rules requiring BNPL providers to conduct affordability assessments, provide clear disclosures, and submit to FCA supervision. Australia implemented similar requirements through amendments to its National Consumer Credit Protection Act. And in the United States, the CFPB’s interpretive rule classifying BNPL providers as credit card lenders subjected them to Regulation Z requirements, including standardized disclosures and dispute resolution procedures.
The combined effect has been to raise the cost of offering BNPL products significantly. Affordability checks add friction to the checkout process, reducing conversion rates. Regulatory compliance requires legal and compliance teams that early-stage BNPL companies did not budget for. And the obligation to report BNPL usage to credit bureaus has made some consumers more cautious about using the products, particularly for small discretionary purchases.
Klarna, the largest independent BNPL provider, has responded with the most ambitious transformation. The company has repositioned itself as a comprehensive shopping and payments platform, with BNPL as one feature among many. Its app now includes price comparison tools, package tracking, a loyalty program, and an AI-powered shopping assistant that helps users find products across retailers. Klarna’s IPO filing, expected in late 2026, will reveal how investors value this broader positioning compared to a pure BNPL business.
Affirm has taken a different approach, moving upmarket toward larger purchases and longer repayment terms. The company’s partnerships with Shopify, Amazon, and Walmart for point-of-sale financing on purchases over $250 generate higher revenue per transaction and face less regulatory scrutiny than small-ticket pay-in-four products. Affirm’s debit card, which allows users to split any purchase into installments after the fact, represents another attempt to embed BNPL into a broader financial relationship.
Afterpay, now fully integrated into Block’s Cash App ecosystem, is leveraging its parent company’s broader financial platform to cross-sell banking, investing, and tax filing services to BNPL users. The integration strategy positions Afterpay less as a standalone credit product and more as an acquisition channel for Block’s financial services superapp.
Smaller BNPL providers are finding the environment more challenging. Several mid-tier players have exited the market or been acquired at steep discounts to their peak valuations. Zip, the Australian BNPL firm, shut down its US operations entirely and refocused on its home market. The consolidation trend is expected to continue as regulatory compliance costs create economies of scale that favor larger players.
The irony of the BNPL regulatory crackdown is that it may ultimately strengthen the surviving companies by clearing out undercapitalized competitors and forcing the industry toward more sustainable business models. The firms that emerge from this period will look very different from the growth-at-all-costs BNPL startups of 2020, but they may be far more durable businesses as a result.
