CCD2: A new era for Buy Now, Pay Later

The new European Consumer Credit Directive marks a major turning point for Buy Now, Pay Later (BNPL) providers. Adopted in October 2023, The directive must be transposed into national law by November 20, 2025, and becomes applicable and enforceable as of November 20, 2026.

The goal? To strengthen consumer protection and establish fair rules for all credit providers, including BNPL players.

1. The new CCD2 requirements for BNPL

Until now, BNPL offers largely fell outside the scope of the original 2008 Consumer Credit Directive (CCD1) because of their low amounts and short durations.

CCD2 changes that: it explicitly extends the scope of application to BNPL solutions and now imposes obligations similar to those faced by traditional credit institutions.

The main requirements include:

Systematic affordability assessment: before granting installment payments, the lender must evaluate the consumer’s ability to repay based on sufficient and up-to-date information, even for amounts below €200.

This assessment must rely on objective financial data (income, expenses, banking history, etc.) rather than simple self-declarations.

Pre-contractual information obligation: consumers must receive clear information about the total cost, payment schedule, possible fees, and consequences of non-payment.
Regulation of digital channels: information must remain understandable even on mobile or online platforms, ensuring a smooth and transparent user experience.
Shared responsibility between lenders, intermediaries, and merchant platforms regarding communication of information and risk evaluation.
Post-loan monitoring must be implemented to identify borrowers who have, or may have, difficulties meeting their financial commitments. Once detected, lenders must direct struggling borrowers, free of charge, toward organizations specialized in debt counseling.

2. What this means in practice

Until now, most BNPL players offered 3- or 4-installment payments without conducting in-depth affordability assessments.

Their model relied mainly on behavioral analysis (customer history, internal scoring, shopping behavior, etc.) and on limited exposure due to short repayment periods.

With CCD2:

BNPL offers become fully recognized as credit products, subject to the same obligations as traditional loans.
BNPL providers must access reliable financial data to perform a robust affordability assessment.
Processes must be documented and auditable by regulators.
The risk of regulatory non-compliance becomes significant, with potentially severe sanctions.

In practice, this represents a profound transformation of the credit-granting process, especially for fintechs and merchants that must balance compliance with a smooth customer experience.

3. Open Banking: A key lever for CCD2 Compliance

Open Banking, which allows consumers to share their banking data securely and instantly, offers a clear answer to these new requirements.

Thanks to transactional data from bank accounts:

The lender can instantly and fairly identify all income and expenses of the loan applicant to accurately assess affordability.
The evaluation is automated, objective, and fast, without paperwork or excessive friction.
The consumer retains full control over their data through explicit consent, in compliance with GDPR and PSD2.

Open Banking thus enables compliance with CCD2 regulatory requirements while preserving the frictionless BNPL experience, a core element of the model.

4. How Algoan can help BNPL providers

Algoan’s products offer ready-to-use solutions to meet the challenges of CCD2:

Transaction Data

Secure retrieval of banking data.
GDPR and PSD2 compliance.
Tailored consent for the collection and processing of personal data for credit granting.

Credit Insights

Detailed financial profile analysis of the consumer based on banking data (income, expenses, savings, fixed charges, etc.).
Instant delivery of key indicators, compliant with CCD2 requirements.
Simple API integration into BNPL or merchant journeys.

Credit Score

Calculation of a credit score assessing the applicant’s creditworthiness.
Automated credit decisioning while managing default risk.
Optimized conversion rates with minimal friction.

By combining Credit Insights and Credit Score, BNPL providers can:

Conduct a compliant and transparent affordability assessment;
Offer a smooth user experience;
Maintain strong conversion rates, even in a stricter regulatory environment.

In conclusion

The CCD2 marks a new stage of regulatory maturity for installment and BNPL solutions across Europe.

Those who anticipate these changes early, through solutions like Algoan’s, will turn this constraint into a competitive advantage: more trust, more transparency, and stronger protection against over-indebtedness.

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Christelle Diguet, Marketing, Communication & Design Director at Algoan.