How to offer 0% finance to customers

Why interest-free credit is surging - and what is changing

Offering 0% finance can lift conversion, increase average order value and reduce basket abandonment at the point of sale. In the UK, customers have grown comfortable spreading costs for essentials and big-ticket purchases, especially when there is no interest to pay. But this is not the unregulated frontier it once was. The regulatory map is being redrawn and the clock is ticking.

From mid-2026, Buy Now, Pay Later will fall under a full FCA regime that introduces affordability checks, stronger consumer protections and access to dispute resolution. The intention is to close gaps that left shoppers exposed and to standardise how credit-like products are marketed and managed. For retailers, the implication is straightforward - 0% finance must be offered within a framework that can withstand scrutiny.

The picture is broader. From January 2025, new UK safeguarding rules require certain funds handled by payment and finance services to sit in designated safeguarding accounts, improving customer money protection in transit. Many merchants have relied on third parties to process deferred payments; those relationships and flows will need to align with the new standards. Meanwhile, the government is modernising the Consumer Credit Act, shifting more oversight to the FCA. The result should be simpler rules, but also higher expectations on culture, conduct and transparency.

There remains flexibility. Interest-free agreements repaid within 12 months are currently exempt from the full BNPL regime, which enables a lighter operational setup for classic 0% instalment offers. That said, the exemption could change. Sensible merchants are planning their offers so they can adapt quickly if the scope tightens.

Understanding APR is not the only hurdle. FCA research shows many customers still struggle to judge what constitutes a good rate in motor finance. That insight generalises - if your customers do not understand the cost profile, they will hesitate, even at 0%. Clear, plain-English explanations reduce drop-off and build trust. It also helps you meet the FCA’s emphasis on fair value, commission transparency and good outcomes.

The winning formula is simple: transparent terms, robust compliance, and a user journey that explains, not obscures.

As a UK-based retail finance broker, Kandoo helps businesses structure compliant, conversion-friendly 0% finance that aligns with these evolving rules. Whether you sell sofas, bikes or home improvements, now is the time to design your offer for the world that arrives in 2025 and 2026 - not the world of 2021.

Bottom line - compliance is becoming a growth lever, not a brake.

Who should consider 0% finance right now

If you sell higher-value goods or services where customers compare monthly affordability, interest-free credit can be the most persuasive nudge at checkout. Retailers in furniture, electronics, cycles, home improvements and specialist healthcare regularly see uplifts in order value and conversion when 0% is visible and explained clearly. Service businesses, such as trades or clinics, benefit too when projects can be staged without adding interest.

You will gain most if customers already weigh purchases against monthly budgets, and if your margins can absorb the subsidy or provider fees. It is also well suited to merchants with seasonality, where smoothing demand can stabilise cash flow. For motor-related purchases, transparency around commissions and costs is essential, given the FCA’s current focus. If your internal processes are light-touch today, partner with a broker or lender who can deliver affordability checks, safeguarding alignment and fair-value documentation without slowing the sale.

The finance vocabulary - decoded for a UK checkout

• 0% finance - An interest-free credit agreement. The cost to the customer is the ticket price, spread over instalments. The merchant usually pays a subsidy or fee.

• BNPL - Short-term deferred payment or instalment products. From mid-2026 most will be FCA-regulated, introducing affordability checks and Ombudsman access.

• Affordability check - An assessment to ensure repayments are sustainable for the customer. Expect proportionate checks under FCA rules.

• Safeguarding account - A designated account structure from January 2025 to protect customer funds handled by payment firms and certain finance flows.

• Section 75 protection - When applicable, credit-backed purchases can carry protections for faulty or undelivered goods. BNPL regulation is expected to strengthen access.

• Commission disclosure - Clear explanation of any commissions paid in finance journeys, a growing FCA focus in motor and retail finance.

• Exemption for under-12-months interest-free - Currently outside full BNPL regulation. Useful for classic 6-to-12-month 0% offers, but subject to future change.

• Fair value - FCA expectation that the overall package provides reasonable value, with fees and risks communicated in plain English.

Choosing your 0% model in practice

1. Merchant-subsidised 0% with third-party lender - The retailer pays a fee or subsidy to a regulated lender that provides interest-free credit. Strong compliance coverage, predictable pricing, and smooth UX with instant decisions.

2. BNPL provider at checkout - A third-party BNPL platform offers 0% instalments. Suitable for ecommerce speed and conversion. Prepare for 2026 regulation that will add affordability checks and disclosures.

3. In-house credit with broker support - You maintain more control over underwriting rules while a broker sources lenders and manages compliance workflows. Useful for niche products or varied ticket sizes.

4. Point-of-sale finance for services - Installments for trades or clinics, issued on-site or by link. Needs robust affordability checks, identity verification and commission transparency where relevant.

5. Short-term interest-free under 12 months - Leverage the current exemption to simplify rollout, while architecting processes that can scale to a fully regulated regime if the exemption narrows.

Tip - Pick the model that aligns with your AOV, margin profile, and regulatory appetite, not just your ecommerce stack.

Pounds and pence - what it could cost or return

Can your customers and your business qualify

Eligibility is two-sided. Customers will face proportionate affordability checks that assess income, outgoings and credit behaviour to ensure repayments are sustainable. Expect identity verification and soft searches that do not impact credit scores for pre-qualification, followed by clearer contractual documents that spell out instalments, fees and protections in plain English. For motor-related purchases, disclosure around any commission is increasingly important to meet current expectations and avoid post-sale complaints.

On the merchant side, lenders will look for trading history, UK establishment, product suitability and evidence of fair customer outcomes. With new safeguarding requirements arriving in 2025, your payment flows may need adjustments so that funds are protected when passed through payment service providers. If you plan to rely on the under-12-month interest-free exemption, keep terms within the limits and build a roadmap to scale into the full regime. Good governance, accurate payment reporting and a culture that values transparency will support approval and enduring partnerships.

From idea to live checkout - the practical steps

1. Define products, term lengths and target AOV sweet spot.

2. Choose a compliant lender or BNPL partner via broker.

3. Map customer journey - disclosures, affordability, and consent.

4. Integrate checkout and ID verification with clear messaging.

5. Configure safeguarding-aligned settlement and reconciliation.

6. Train staff on scripts, commissions and fair-value outcomes.

7. Launch with soft limits, monitor declines and complaints.

8. Iterate terms and UX using conversion and arrears data.

Weighing it up - benefits and drawbacks

Read this before you press go

Set a policy for affordability that reflects your product’s risk and your brand’s promise. Build disclosures that a teenager could understand - instalment amounts, terms, missed-payment consequences and any fees. Align payment flows with the new safeguarding rules well ahead of January 2025. If you participate in motor-related finance, tighten commission transparency and record-keeping. Finally, plan for 2026 - when the FCA publishes final BNPL rules, you will want the flexibility to adjust term lengths, checks and marketing copy quickly. Treat fair value and cultural expectations as design inputs, not hurdles.

If 0% is not quite right today

1. Longer-term low APR credit - Small interest rate but lower subsidy cost, good for higher tickets beyond 12 months.

2. Layaway or pay-in-advance plans - No credit risk, suitable for bespoke items with production lead times.

3. Membership or subscription bundles - Spread services over time, with built-in cancellation rights and transparent pricing.

4. Invoice with staged milestones - Common for services and trades, with clear acceptance points and less checkout integration.

Quick answers to common questions

Q: Will all BNPL be regulated in 2026? A: Most short-term instalment products will come under FCA rules from mid-2026, introducing affordability checks, transparency standards and stronger consumer protections.

Q: Are under-12-month 0% plans exempt? A: Yes, interest-free credit repaid within 12 months is currently exempt from full BNPL regulation, but businesses should monitor for legislative changes.

Q: What changes in January 2025 affect me? A: New safeguarding rules require certain customer funds to be held in designated accounts, improving protection and affecting how finance payments are handled.

Q: How should we disclose commissions? A: Be clear and specific about any commissions linked to finance. This is a focus area, especially in motor finance, and supports trust and compliance.

Q: Do affordability checks harm credit scores? A: Pre-qualification often uses soft searches. Lenders may use hard searches at completion, which are recorded. Clear consent and explanation are essential.

Q: What governance does the FCA expect? A: Strong culture, fair value, transparent communications and robust complaint handling. Document processes and monitor outcomes continuously.

Where to go from here

Map your product set, pick terms within your margin, and shortlist providers that already operate to FCA standards. Engage a broker like Kandoo to structure the right model, integrate affordability checks and disclosures, and align safeguarding ahead of 2025. Launch with controlled limits, then optimise using conversion and arrears data.

Important information

This article is for general information only and does not constitute financial or legal advice. Regulations can change. Always seek independent advice and read lender terms before offering credit to customers.