UK retailers, including the country’s leading supermarket groups, are accelerating investment in agentic AI and new payment innovations, yet many remain unsure about their legal and operational readiness for the next major shift in retail payments.
TLT’s latest Retail Agility Report, based on a survey of the top 100 UK retailers across grocery (food & drink), fashion, beauty, home, lifestyle and leisure, shows a sector on the brink of rapid payments transformation. Innovation is gathering pace in areas including autonomous purchasing, loyalty linked payments and Buy Now Pay Later (BNPL), but governance, compliance and clarity on AI liability are lagging behind.
BNPL is gaining traction among UK grocers but compliance concerns loom large.
For the grocery sector, BNPL is becoming an increasingly important payment innovation as consumers look for more flexibility when managing household budgets, including for everyday essentials, writes Perran Jervis, Partner and Head of Retail at TLT.
Key findings for the grocery sector include:
• BNPL rising up the agenda: 40% of grocery retailers now identify BNPL as a priority payment innovation, reflecting a notable shift in consumer appetite for flexible checkout options instore and online.
• Regulation is the biggest barrier: Half (50%) of grocers prioritising BNPL say regulatory compliance is their primary legal challenge – significantly ahead of consumer disputes (20%) and contract complexity (20%).
• Experience is mixed: While 20% of grocers report they have not yet encountered legal challenges with BNPL, the majority are navigating an increasingly complex and evolving regulatory landscape.
• Wider innovation push: Beyond BNPL, 50% of grocers are prioritising digital wallets and 30% are investing in both agentic AI and loyalty linked payments to streamline the customer journey and differentiate in a highly competitive market.
Agentic AI rises – but readiness across retail remains low
Across the broader retail market, nearly half (49%) of all retailers are now investing in agentic AI – including early grocery use cases such as autonomous replenishment, dynamic pricing decisions and AI driven selection of the best payment method at checkout.
However, only 15% say their contracts and infrastructure are ready for AI mediated transactions, and almost half report uncertainty around who is liable when AI agents initiate or approve payments. This creates significant risk for grocers as automated decision making becomes more embedded in routine shopping journeys.
Retailers doubling down on payment innovation
Competition across grocery and wider retail is intensifying as businesses strive to simplify checkout, sharpen loyalty and reduce friction.
Key findings from the full survey include:
• Digital wallets remain the top priority for 50% of retailers.
• BNPL continues to grow sector wide, prioritised by 45% of respondents, with particularly high momentum in grocery and fashion.
• Open Banking remains uneven, with only 15% fully integrated, while 25% are piloting solutions and 32% planning adoption.
• Crypto and blockchain methods remain low priority, selected by only 10% of businesses.
Regulation uncertainty persists
Regulatory pressures are mounting across the industry, with 70% of retailers citing uncertainty around regulation as a major challenge. This is particularly acute in grocery, where thin margins and high transaction volumes make compliance and operational clarity essential.
The report highlights three major risk areas:
• Data sharing: Only 23% of all retailers say they are fully compliant with new third-party data sharing requirements.
• AI-era consumer protections: Just 11% have updated frameworks fit for autonomous or AI-driven payments.
• Customer safeguards: While 48% have comprehensive protections in place, 8% report minimal safeguards.
Payment methods have shifted from being a technical necessity to a strategic differentiator. For grocers in particular – where speed, flexibility and value are paramount – the payment experience is increasingly a deciding factor for customers choosing where, how and when they shop.
The payments landscape is further complicated by the rise of agentic AI. We are entering a transformative period in which grocers are no longer designing journeys solely for human customers – they are beginning to design for AI agents that will compare prices, assess substitutions, benchmark value and execute purchases autonomously.
BNPL is no longer just for big-ticket or online purchases – grocery retailers are seeing real demand for flexible payment options at the checkout. But it is also an area where regulation is tightening, with 50% of grocers citing compliance as the biggest hurdle, and new regulation on the horizon. It’s vital that grocers stay ahead of compliance requirements to protect both their business and their customers. Those who can combine innovation with strong governance, robust customer safeguards and trust will be best placed to build loyalty and trust in a fast-changing market.
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