Lloyds finds consumers prefer bank-backed buy now pay later options at checkout

More than a third of UK consumers would be more likely to use buy now, pay later services if those products were integrated directly with their bank, according to new research from Lloyds Merchant Services. The survey data highlights how trust and institutional backing are becoming critical factors in the adoption of flexible payment methods across retail.

The report, titled The Flex Economy, polled 2,000 UK consumers and 150 businesses. It reveals that buy now, pay later is transitioning from a checkout add-on to a mainstream expectation, with users increasingly treating these services as budgeting tools rather than emergency credit.

Buy Now, Pay Later Drives Retail Choice and Spending

Among current users of flexible finance, 61 per cent are more likely to shop with retailers offering buy now, pay later, according to the Lloyds survey. That figure rises to 63 per cent for point-of-sale finance options. Additionally, half of adopters said they are comfortable using BNPL for mid-ticket purchases ranging from £100 to £500.

Cash-flow management has emerged as the primary motivator for using these payment methods. The findings indicate that flexible finance is becoming part of everyday financial planning for many households, rather than a last-resort borrowing tool.

Retailers Report Growing Demand and Commercial Benefits

Demand for flexible payment options is also intensifying on the merchant side. According to the report, 84 per cent of retailers say customer demand for buy now, pay later is growing, while 87 per cent report increased interest in point-of-sale finance. Businesses already offering these options are seeing tangible commercial advantages.

Sixty-two per cent of merchants offering BNPL report higher average order values, while 54 per cent say POS finance boosts repeat business. Furthermore, 98 per cent of businesses surveyed said flexible finance is important to their growth plans, underscoring its strategic role in retail operations.

New Regulation on the Horizon

The Financial Conduct Authority plans to bring buy now, pay later under formal regulation, with new rules targeted to come into effect in mid-July 2026. The regulations will focus on clearer information disclosure, affordability checks, and requiring providers to be authorised before offering deferred payment credit products.

According to Lloyds, 97 per cent of businesses are already considering how regulation will affect the purchase experience they offer. Merchants are particularly concerned about how affordability checks might impact approval rates and conversion at checkout. The report includes practical guidance to help retailers embed finance responsibly, from selecting trusted partners to ensuring transparent communication with customers.

Trust and Bank Integration Key to Wider Adoption

The survey findings suggest that integrating buy now, pay later products with established banking institutions could accelerate adoption. However, this shift also reflects broader concerns about consumer protection and financial responsibility as the market matures under regulatory oversight.

Melinda Roylett, managing director at Lloyds Merchant Services, said the way people pay is evolving quickly. She noted that embedding finance responsibly at checkout gives customers the control they want while helping businesses boost loyalty and growth. Roylett added that cash management is the number one reason people choose embedded lending, and the company’s role is to help merchants turn this shift into stronger sales through responsible, regulated finance solutions.

As the mid-2026 deadline approaches, both retailers and payment providers are expected to continue adapting their offerings to meet the new regulatory framework while maintaining customer experience and conversion rates.