Five alternatives to Klarna are compared here, including Clearpay, PayPal Pay in 3, Zilch and 0% purchase credit cards. From 15 July 2026, Klarna, Clearpay and other deferred payment credit providers became FCA-regulated for the first time, meaning affordability checks and Financial Ombudsman access now apply to this type of borrowing across every provider compared here.
TL;DR · LAST REVIEWED 21 July 2026
- Buy now, pay later products became FCA-regulated consumer credit on 15 July 2026, applying to Klarna, Clearpay, PayPal and other deferred payment credit providers alike.
- All BNPL providers must now run affordability checks before approving credit, a change from the largely check-free approval process that applied before regulation.
- Clearpay and PayPal Pay in 3 operate on broadly similar interest-free, four-instalment structures to Klarna's own Pay in 3 product.
- Zilch operates as a direct-to-consumer BNPL provider with its own FCA-regulated credit product rather than being tied to a specific retailer checkout.
- A 0% purchase credit card is a regulated consumer credit alternative that predates the BNPL regulatory changes and has always required affordability assessment.
- Missed BNPL payments can now be reported to credit reference agencies more consistently across providers, which was not previously guaranteed under the unregulated regime.
How Klarna compares with other deferred payment and short-term credit options
| Klarna | Pay in 3, Pay in 30 days, longer financing | FCA-regulated from 15 July 2026 |
| Clearpay | Pay in 4 instalments, interest-free | FCA-regulated from 15 July 2026 |
| PayPal Pay in 3 | 3 interest-free instalments | FCA-regulated from 15 July 2026 |
| Zilch | Direct-to-consumer BNPL, not tied to one retailer | FCA-regulated consumer credit provider |
| 0% purchase credit card | Fixed 0% period, then standard interest applies | Regulated consumer credit, pre-dates BNPL rules |
Source: FCA policy statement PS26/1 and provider information pages, accessed July 2026
KEY FACTS
- BNPL products became FCA-regulated consumer credit from 15 July 2026 under the FCA's final rules, published as PS26/1
- An estimated 10.9 million UK adults used a BNPL product at least once in the year to May 2024, according to FCA data
- Providers without FCA authorisation or temporary permission were required to stop new lending from 15 July 2026
- Regulated BNPL borrowers gained access to the Financial Ombudsman Service for the first time from the same date
- Affordability checks now apply to BNPL purchases, including transactions under £50
What changed for Klarna and its rivals on 15 July 2026
From 15 July 2026, deferred payment credit agreements, the regulatory term for buy now, pay later products, became a regulated consumer credit activity requiring FCA authorisation, bringing Klarna, Clearpay, PayPal Pay in 3 and comparable providers under the same oversight regime as other short-term lending.
Before 15 July 2026, buy now, pay later products sat outside the consumer credit regulation that applies to credit cards, personal loans and other forms of borrowing, despite BNPL lending reaching an estimated £13 billion a year by 2024. The Financial Conduct Authority published its final rules in policy statement PS26/1 on 11 February 2026, setting Regulation Day for 15 July 2026. From that date, providers offering this type of deferred payment credit needed either full FCA authorisation or temporary permission to continue lending, and providers without either were required to stop offering new agreements. The change applies to the product category itself rather than singling out any one provider, so a reader comparing Klarna against a rival is now comparing several regulated products against each other rather than one regulated and several unregulated options, as was the case before July 2026.
How does Clearpay's structure compare with Klarna's
Clearpay operates a four-instalment, interest-free repayment structure broadly comparable to Klarna's own Pay in 3 and Pay in 4 options, and is now subject to the same FCA affordability-check and disclosure requirements as Klarna following the July 2026 regulatory change.
Clearpay's core product splits a purchase into instalments taken automatically from a linked card or bank account, without added interest as long as repayments are made on schedule, which mirrors the basic structure of Klarna's shorter-term products. The practical differences between the two now sit mainly in retailer coverage, since checkout availability of BNPL options varies by merchant rather than by which provider a shopper personally prefers, and in each provider's own app-based spending and tracking tools. Under the post-July 2026 regulatory framework, both providers must run an affordability assessment before approving a purchase, including purchases under £50, provide clear information on repayment terms in plain language, and give customers access to the Financial Ombudsman Service if a complaint cannot be resolved directly with the provider.
How does PayPal Pay in 3 compare
PayPal Pay in 3 offers three interest-free instalments through an existing PayPal account, which can be more convenient for shoppers who already use PayPal at checkout regularly, and is now regulated on the same basis as Klarna and Clearpay from 15 July 2026.
PayPal's Pay in 3 product works through a shopper's existing PayPal account rather than requiring a separate app or sign-up process at the point of sale, which is its main practical distinction from Klarna and Clearpay for anyone who already uses PayPal as their primary online checkout method. The instalment structure itself, three interest-free payments spread over a short period, sits within the same broad BNPL category now covered by FCA regulation. As with Klarna and Clearpay, PayPal's deferred payment product is subject to mandatory affordability checks before approval and to the same Financial Ombudsman Service access if a dispute arises, changes that came into effect for the sector as a whole rather than for any single provider.
How does Zilch differ from retailer-linked BNPL providers
Zilch operates as a direct-to-consumer BNPL provider rather than being tied to individual retailer checkouts, giving shoppers a single line of BNPL credit usable more broadly, and it is regulated as a consumer credit provider under the same July 2026 rules as retailer-integrated options.
Where Klarna, Clearpay and PayPal Pay in 3 typically appear as a payment option at a participating retailer's checkout, Zilch's model gives the shopper their own spending instrument that can be used more widely, functioning closer to a virtual card with a built-in instalment repayment structure. This structural difference does not change its regulatory position: Zilch operates as an FCA-regulated consumer credit provider and, like the retailer-linked options, is required to run affordability checks and provide clear repayment information under the rules that took effect on 15 July 2026. Anyone comparing a direct-to-consumer BNPL provider against a retailer-linked one should weigh the flexibility of where the credit can be used against the fact that consolidating spending onto a single BNPL line can make it harder to track total outstanding short-term debt across multiple retailers.
How does a 0% purchase credit card compare with BNPL
A 0% purchase credit card offers an interest-free period that is typically longer than a BNPL instalment plan, and has always been subject to standard consumer credit regulation, including affordability checks, since credit cards were never part of the BNPL regulatory gap.
For purchases where a longer interest-free period would help, a 0% purchase credit card is worth comparing directly against BNPL options, since some cards offer 0% interest on new spending for a year or more, considerably longer than the typical few weeks or months covered by a Pay in 3 or Pay in 4 BNPL agreement. Credit cards have always sat within full consumer credit regulation, including mandatory affordability checks and Financial Ombudsman Service access, so the July 2026 change brings BNPL products up to a broadly similar regulatory standard rather than creating a new gap between the two. The key practical difference that remains is what happens after the interest-free period ends: a 0% purchase card reverts to the card's standard interest rate on any remaining balance, while a BNPL agreement typically has a fixed, shorter repayment schedule with no ongoing interest rate to revert to, provided the agreed instalments are kept up. Consumers weighing up which provider to use should treat regulatory status as a baseline requirement rather than a differentiator, since every mainstream BNPL provider operating in the UK from 15 July 2026 needs the same FCA authorisation to continue lending, and instead compare repayment structure, retailer availability and total cost across the specific purchase being financed. Anyone still repaying an agreement taken out before 15 July 2026 should also check whether transitional terms apply to that existing agreement, since the FCA's rules primarily govern new lending decisions from Regulation Day onward rather than automatically rewriting agreements already in place.
RELATED GUIDES
DISCLAIMER
This article is editorial information, not financial advice. Kael Tripton Ltd is not authorised or regulated by the Financial Conduct Authority. Figures were correct at the last review date shown above; verify current rates and rules with the primary sources listed below before acting.
Frequently asked questions
Is Klarna now FCA regulated
Yes. From 15 July 2026, deferred payment credit agreements, the regulatory category covering buy now, pay later products, became a regulated consumer credit activity, requiring providers including Klarna to hold FCA authorisation or temporary permission to continue lending.
What is the main difference between Klarna and Clearpay
Both offer broadly similar interest-free instalment structures. The practical difference for most shoppers is which retailers offer each option at checkout, since availability varies by merchant, and each provider's own app-based account management tools differ in design.
Do affordability checks now apply to small BNPL purchases
Yes. Under the FCA's rules that took effect on 15 July 2026, affordability checks apply to BNPL purchases including those under £50, a change from the largely check-free approval process that applied before regulation.
Can you complain to the Financial Ombudsman Service about a BNPL provider
From 15 July 2026, BNPL customers gained access to the Financial Ombudsman Service if a complaint cannot be resolved directly with a regulated provider, a protection that was not consistently available before the sector was regulated.
Is a 0% purchase credit card safer than BNPL
Both are now regulated consumer credit products with mandatory affordability checks. A 0% card typically offers a longer interest-free period but reverts to standard interest on any remaining balance once that period ends, while BNPL agreements typically have a fixed, shorter repayment schedule.
SOURCES
- FCA policy statement PS26/1 on Buy Now Pay Later regulation – accessed 21 July 2026
- FCA: Regulating Buy Now Pay Later (Deferred Payment Credit) – accessed 21 July 2026
- FCA Financial Lives data on BNPL usage – accessed 21 July 2026
