The European BNPL market is on a remarkable growth trajectory. In 2025, BNPL transaction values are projected to reach $191.3 billion—a number that’s expected to swell to nearly $294 billion by decade’s end.
But this surge isn’t happening in a regulatory vacuum. As BNPL becomes a mainstream credit product, European policymakers are moving to bring it firmly under the umbrella of consumer credit law. The revised Consumer Credit Directive, or CCD2, marks the most significant regulatory change to date. This move has far-reaching consequences for creditors, fundamentally altering the way BNPL is structured, priced, and delivered.
Let’s take a look at the directive’s key elements to get a better sense of their operational implications for major financial institutions across Europe.
CCD2 brings BNPL under consumer credit law
Under the revised Consumer Credit Directive, BNPL products—especially those offered by third-party providers—will be explicitly regulated as consumer credit for the first time.
Expanded scope
CCD2 is designed to close loopholes that allowed many BNPL products to operate without oversight. It eliminates the previous lower threshold (typically €200 or €250) and expands the upper limit to €100,000, meaning that virtually all BNPL arrangements will have to meet the same regulatory standards as traditional consumer loans.
Limited exemptions
While exemptions are provided, they’re pretty limited, aside from some deferred payment options offered by direct suppliers. Most BNPL products, especially those involving third-party providers or large online merchants, will be regulated.
Fee and interest caps
Under CCD2, BNPL products will be subject to national APR and fee caps. Providers accustomed to higher fees or more flexible pricing will need to recalibrate their models, potentially absorbing margin compression or passing costs to merchants.
Stricter creditworthiness and affordability checks
Perhaps the most significant change is the requirement for stricter creditworthiness and affordability assessments. It’s a major departure from the frictionless, instant-approval model that’s fueled BNPL’s popularity for years.
Providers will need to access reliable financial data to conduct thorough risk assessments and ensure consumers can manage their repayments without undue hardship.
Enhanced transparency and disclosure
Finally, CCD2 requires providers to share clear, detailed information about credit terms, costs, and risks well before a consumer commits to a transaction. This includes standardized disclosures and, in some cases, the introduction of a European Standardized Information Sheet (ESIS) for credit agreements.
Marketing, onboarding, and servicing processes will all have to be updated to ensure widespread compliance.
The market’s response to CCD2 is mixed
Despite the promise of increased consumer trust, many are concerned about the operational impact of these regulations for BNPL providers. With the emphasis on advanced risk assessment tools and robust compliance infrastructure, it’s anticipated that the sector will see a significant uptick in costs.
It may be the consumer who pays the highest price for these changes. To manage growing demands, providers may need to raise merchant fees, introduce minimum spend thresholds, or tighten eligibility criteria. These adjustments could, in turn, make BNPL services less accessible and convenient.
Traditional banks, with their established compliance frameworks and extensive access to consumer data, are well-positioned to capitalize on this shift. As the regulatory landscape shifts, the playing field may increasingly favor incumbent institutions that can absorb higher compliance costs and leverage their expertise in risk management.
Decision engines tackle challenges beyond basic compliance
When it comes to CCD2, the most progressive providers aren’t just aiming to check the compliance box. They’re leveraging advanced technology to transform their operations from top to bottom.
Decision engines are providing forward-thinking institutions with a unique opportunity to set themselves apart through technological innovation. Using pre-defined rules, algorithms, and data inputs, these tools automate and optimize mission-critical workflows, including creditworthiness and affordability assessments.
By streamlining processes and improving operational efficiency, modern decisioning tools contain operational costs. Even as regulatory requirements make application processes more rigorous, these intelligent systems deliver instant or near-instant decisions, preserving the seamless convenience that consumers have come to expect from BNPL. As a result, financial institutions can maintain high approval rates and strong customer satisfaction, all while remaining fully compliant with CCD2.
Beyond efficiency, these decision engines offer adaptability. They can be tailored to meet country-specific regulations, dynamically adjusting pricing, disclosures, and eligibility criteria to ensure compliance in every market. This kind of agility is critical for scaling BNPL offerings across borders and keeping pace with future regulatory demands.
Decision engines reduce risk assessment costs by up to 70%
A leading American financial institution faced significant challenges accurately assessing risk. Fragmented data sources and inefficient processes led to long, frustrating waits for both analysts and customers. These bottlenecks hindered the company’s ability to deliver timely and accurate risk evaluations.
By implementing C&R Software’s credit decisioning engine, the company redefined its risk assessment approach. The new solution enabled seamless analysis of diverse data sources, automating key workflows and dramatically improving efficiency:
- 80% reduction in development cycle time
- 70% decrease in maintenance costs
- 95% reduction in average processing time.
These improvements helped the company increase application volume and income, while delivering faster, more accurate risk assessments to its customers.
Unleash new opportunities amidst regulatory complexity
The revised Consumer Credit Directive marks a new era for BNPL in Europe. Institutions that invest in strong decisioning infrastructure are empowered to do more than simply meet the basic requirements. By streamlining credit and risk assessments, they’ll unlock new efficiencies and establish a true competitive advantage.
C&R Software excels in seamlessly adapting to ever-changing regulatory environments, ensuring that compliance efforts are both proactive and resilient. The FitLogic credit decisioning rules engine offers comprehensive audit trails and resilient systems to enhance risk management at every stage. Data protection is a fundamental priority, so teams assess the latest and most up-to-date information while maintain compliance.
Let us show you C&R Software compliance in action. Reach out to one of our regional specialists today at inquiries@crsoftware.com.
