The European Union is set to implement stricter regulations regarding Buy Now Pay Later (BNPL) payment methods. These changes, scheduled to take full effect by the end of 2026, aim to modernize the legal framework surrounding consumer credit. Swedish e-commerce businesses and financial institutions are now preparing for a shift that will impact how credit is marketed and offered to online shoppers.
The Evolution of Digital Credit
Buy Now Pay Later has become a dominant payment method in the Swedish e-commerce sector since its emergence in the 2000s. This payment model allows consumers to receive goods before paying for them, offering a sense of security and flexibility. For many shoppers, this serves as a convenient alternative to using a traditional credit card.
Merchants favor BNPL because it typically leads to higher conversion rates and increased average order values. The e-commerce store receives payment immediately, minus service fees, while the credit risk and administrative burden are handled by the payment service provider. However, the rapid growth of this unregulated credit market has prompted legislative action from the EU.
From CCD1 to CCD2
The current regulatory framework dates back to 2008, known as the Consumer Credit Directive 1 (CCD1). This legislation was created before the explosion of digital commerce and modern fintech solutions. To address the changing landscape, the EU introduced the Consumer Credit Directive 2 (CCD2) in the autumn of 2023.
The primary objective of the updated directive is to protect consumers from over-indebtedness and irresponsible lending practices. As digitalization accelerates, the line between simple payments and credit products has blurred. The upcoming 2026 updates to CCD2 are designed to close loopholes that have allowed certain credit products to operate with minimal oversight.
New Obligations for E-commerce Merchants
The updated directive places significant responsibility on any online retailer offering credit options. Markus Bergström, Head of Risk Management Payments at Svea Bank, notes that the new rules apply to all e-commerce merchants providing BNPL solutions or other forms of consumer credit.
Under the new rules, transparency is paramount. Merchants must provide clear, standard information regarding the total cost of credit and the effective interest rate whenever a credit option is presented. This ensures that consumers understand the financial commitment involved before completing a purchase.
Ban on Dark Patterns
A critical component of the CCD2 is the prohibition of “dark patterns” in user interface design. These are design choices that manipulate or steer users toward specific actions against their best interests.
In the context of online retail, this means stores can no longer use pre-selected checkboxes for credit options. Steering customers toward a “default” credit choice will be considered non-compliant. The consumer must actively choose to use credit rather than having it presented as the standard payment method. This aligns with broader efforts to regulate loans in Sweden and ensure ethical lending practices.
Stricter Creditworthiness Assessments
The directive mandates more rigorous checks on a consumer’s ability to repay debts. Payment providers and merchants must ensure that credit is only granted to individuals with sufficient financial capacity. This requirement moves the industry closer to the standards used for personal loans.
Svea Bank highlights that these credit assessments must occur in real-time to maintain a smooth user experience at the checkout. The challenge for the industry is to implement these stricter checks without causing friction that leads to abandoned shopping carts. This is particularly relevant for smaller credits that previously might have functioned similarly to loans without UC checks, which are now facing greater scrutiny regarding consumer protection.
Timeline for Implementation
The transition to the new rules will occur in stages. Member states, including Sweden, are required to incorporate CCD2 into their national legislation by November 2025. The regulations are expected to apply in full by 2026.
Experts advise e-commerce companies to act early. Merchants should consult with their payment service providers to understand how the technical and legal responsibility will be shared. Legal consultation may also be necessary to ensure marketing materials and checkout flows comply with the new transparency standards.
Future of the BNPL Market
Despite the stricter regulations, industry analysts do not foresee the end of Buy Now Pay Later. Instead, the market is expected to mature. Consumers will likely continue to demand flexible payment options, but the providers remaining in the market will be those that prioritize transparency and responsible lending.
The shift represents a move away from aggressive growth tactics toward a more sustainable credit model. Companies that proactively adapt to these requirements are expected to maintain consumer trust and competitiveness in a regulated environment.
