Why Open Banking data will be key to BNPL affordability compliance

After several years of consultation, industry warnings, and media attention, formal regulation is on the way for Buy Now Pay Later (BNPL) products. From July 2026, providers will be required to carry out affordability checks before offering credit.

This closes a long period of uncertainty for a market that has grown at a pace with minimal regulatory oversight. In the past year, 11 million people in the UK used BNPL. Among 25–34-year-olds, nearly one in three has used it at least once. For many consumers, BNPL has become a standard payment option, comparable in usage to overdrafts.

But as adoption has increased, so have the concerns. Missed repayments, growing reliance on short-term borrowing, and limited support for vulnerable consumers have all been raised as risks.

This article sets out why traditional credit bureau data alone may not be sufficient to meet the FCA’s expectations, and how Open Banking data can help address the specific demands of real-time affordability checks in a BNPL context.

Understanding the FCA’s requirements

The new rules introduce mandatory affordability assessments, access to the Financial Ombudsman Service, and more transparent communication of fees, cancellation rights, and the consequences of missed payments.

However, the FCA has deliberately avoided prescribing a specific method or data source for carrying out affordability checks. That decision sits with lenders and it carries both operational responsibility and regulatory scrutiny.

Checks will need to be proportionate and based on a customer’s financial circumstances at the time of the application. This presents a challenge for providers used to rapid digital journeys: how to introduce adequate assessment without slowing down or introducing friction into the process.

At the same time, checks that are too simplistic, or overly reliant on lagging indicators, are unlikely to meet the standard. The FCA has made it clear that firms must take reasonable steps to avoid lending where repayments are unsustainable. Proving that will require more than just a traditional credit file.

The limits of traditional credit data

Credit bureau data remains an essential tool in many areas of consumer lending. But in the case of short-term, point-of-sale credit like BNPL, it has several known limitations.

• Latency: Most credit files are updated monthly, based on lenders’ reporting cycles. By the time a check is run, the data may already be several weeks out of date, missing recent changes in income, new commitments, or early signs of financial pressure.
  
  

• Completeness: Many BNPL users are ‘thin-file’ or have limited traditional credit history. That doesn’t mean they lack financial activity. It just may not be captured within the bureau ecosystem.
  
  

• Granularity: A credit file can show balances, defaults, and payment patterns, but it doesn’t reveal how someone is managing their money day to day. It cannot determine whether someone is stretching to cover essentials or exhibiting risk behaviours, such as reliance on overdrafts or repeated short-term borrowing.
  
  

These limitations aren’t new. But with the introduction of formal rules, they take on greater importance. Lenders will need to make, and justify, decisions based on a more accurate, timely view of the customer’s circumstances.

Where Open Banking data comes in

Open Banking provides real-time access to categorised current account data, giving lenders a clearer picture of how customers are managing their money in the present ( and not how they were performing weeks ago).

By integrating Open Banking data into affordability assessments, lenders can:

• Confirm income from salary, benefits, or alternative sources
  
  

• Identify recent changes in earnings or payment patterns
  
  

• Track fixed outgoings such as rent, council tax, and utility bills
  
  

• Detect early signs of financial stress (e.g. missed payments, overdraft usage)
  
  

• Flag potential concerns such as repeated use of BNPL or short-term credit products
  
  

This level of detail supports a more proportionate, evidence-based approach to affordability, particularly where traditional data is limited or outdated.

Credit bureau data vs Open Banking: A comparison

Traditional credit data still plays a role, but when it comes to assessing real-time affordability for BNPL, it doesn’t show the full picture. Let’s compare the two data sources side-by-side:

While credit bureau data still plays a role, it often needs to be supplemented to meet the specific requirements of short-term, high-velocity lending products like BNPL.

Applying the right level of scrutiny

The FCA’s rules do not prescribe exactly how lenders should assess affordability. That creates flexibility, but also an explicit requirement to ensure internal approaches are robust, consistent, and well-evidenced.

Checks must be appropriate to the nature and amount of credit offered, and reflect the applicant’s ability to repay without hardship. For customers with little or no bureau history, or those exhibiting signs of pressure, firms will need to demonstrate how they made those judgements.

This increases the importance of up-to-date financial data that can be accessed quickly and assessed reliably. Open Banking data, when properly categorised and integrated into decision-making processes, can help meet that requirement.

It also supports internal coordination. Risk, compliance, data, and product teams can all work from the same structured dataset, minimising manual reviews or inconsistencies.

What happens next

With the rules now confirmed, BNPL firms need to focus on implementation. That includes evaluating current data sources, reviewing decisioning models, and ensuring affordability checks are aligned with regulatory expectations.

Open Banking is already being used across other areas of the credit lifecycle. For BNPL, its ability to deliver real-time, structured, and explainable data makes it particularly suited to the demands of short-term affordability assessment.