How BNPL Started and Why It Needed to Change
Initially, BNPL services were popular because they allowed customers to pay in small, interest-free amounts and did not require severe credit checks. Young folks preferred this alternative over utilizing credit cards. However, as BNPL grew rapidly, there were concerns that customers were taking on debt without understanding the consequences.
According to certain sources, many users, particularly those from Generation Z, utilized BNPL to buy common products such as groceries. This produced financial troubles for some and resulted in additional missed payments.
How AI Helps BNPL Companies Make Smarter Decisions
Artificial intelligence is driving the revolution at BNPL. AI examines a large amount of data, such as how people spend, earn, and repay money, to determine if someone can repay. This allows BNPL enterprises to create payment plans tailored to each individual’s financial situation, resulting in fewer missed payments.
For example, Affirm uses AI to evaluate consumers and alter payment dates based on their current financial position.
In the same way, platforms like Timvero use AI to make payment plans that match each person and to spot possible fraud.
What Governments Are Doing to Protect People?
Governments and regulators around the world see that BNPL needs more control. In the UK, new rules starting in 2026 will make BNPL companies check if people can afford payments, clearly show any late fees, and follow the rules of the Financial Conduct Authority (FCA).
The Consumer Financial Protection Bureau (CFPB) in the US has issued regulations requiring BNPL lenders to adhere to certain credit card requirements, like providing transparent billing statements and account information.
The CFPB recently stated, however, that it will not concentrate on implementing these regulations for BNPL businesses and may potentially do away with them in the future.
New Tech Like Face ID and Blockchain Are Making BNPL Safer
In addition to AI, BNPL businesses are utilizing new technology to improve the security and clarity of payments. To verify users’ identities and prevent fraud, biometric checks such as fingerprint and facial recognition are being included.
BNPL companies are also looking at blockchain technology to make transaction records unchangeable and secure. This can help improve trust and transparency in the payment process.
Banks Are Also Getting Into BNPL
Traditional banks are now joining the BNPL market. For example, Goldman Sachs worked with Apple to offer BNPL options through Apple Pay and the Apple Card. Banks like HSBC and Barclays are also creating their own BNPL services to compete with fintech companies.
How BNPL Is Growing Fast in India?
Due to the increase of digital payments and e-commerce, the BNPL market in India is expanding significantly. The market is expected to reach USD 44.9 billion by 2033, having grown to USD 15.4 billion in 2024.
By providing credit solutions that are connected with UPI, platforms such as LazyPay have profited from this trend.
Additionally, BNPL services are becoming more widely available because of collaborations like PayU and Amazon Pay Later.
Conclusion
The transition of BNPL into its 3.0 phase represents a change to a more technologically sophisticated and responsible financial offering. BNPL providers are responding to previous complaints by incorporating AI-driven risk assessments, enforcing strict regulations, and embracing innovations like blockchain and biometric verification.
By using technology and adhering to regulations, BNPL will be able to strike a balance between customer protection and convenience.
To see how smart and secure payment systems are changing the way we pay, check out OmniPayments.
