What is BNPL, and who is actually lending?
The shop is not lending you anything. Someone else already paid them, in full, at a discount.
The shop was paid on day one and has no further interest in whether you finish paying.
The three-party trick
The interface says "pay in three". The reality is a loan originated in under two seconds by a company you have never had a relationship with.
The lender pays the merchant now, keeping a fee that is typically several times a card fee. The merchant accepts that fee happily, because BNPL reliably raises both conversion and basket size. You then owe the lender, not the shop.
This is why a dispute about the product and a dispute about the payment go to different companies, and why customers routinely find themselves arguing with someone who did not sell them anything.
Where the money is made
Three places, and only one of them is obvious.
Merchant fees, which are the headline revenue and the reason a merchant pays for something that looks like a discount.
Late fees, which are a meaningful revenue line for several operators, and the reason regulators became interested.
Interest on longer plans. The short plans advertise zero interest. The longer ones frequently do not, and the transition between the two is where consumers get caught.
Why regulators woke up
For years BNPL sat outside consumer credit rules in several markets, on the argument that a short interest-free instalment is not really a loan. That argument has been losing.
Two concerns did it. Reporting: if the borrowing is invisible to credit bureaus, nobody can see how much someone has taken on across five different providers. And affordability: a two-second approval at checkout is not an affordability assessment in any meaningful sense.
India tightened the space sharply after the first wave, particularly around who is permitted to load credit onto a prepaid instrument. That was a structural decision, not a cosmetic one, and it reshaped which business models survived.
A friend at the till who quietly settles your bill and then, over the following weeks, becomes considerably less friendly about the arrangement.
Where you meet it
Every checkout offering three instalments, every "pay in 30 days" button, and every credit report that turned out to be quieter than someone's actual borrowing.