Klarna tightens credit checks in UK ahead of buy now, pay later rules
Displayed on a smartphone is the Klarna logo
Rafael Henrique | SOPA Images | LightRocket via Getty Images
LONDON — Swedish fintech firm Klarna on Monday said it is introducing a number of changes to its product in the U.K., as regulators in the country prepare to tighten regulation on the fast-growing “buy now, pay later” industry.
Klarna’s biggest update is strengthening credit checks. The company announced a new feature that will allow users to share their income and spend data with their banks accounts in order to assess whether or not they are able afford future repayments.
Klarna also announced that it would allow users to instantly pay through the platform. Klarna will also provide clear language at checkout, letting customers know they have taken out a loan and the possible consequences for not paying.
Klarna, one of the largest global buy-now, pay later (BNPL) operators, is Klarna. This service allows shoppers to divide their purchases into monthly installments. In 2020, about $97 billion of global e-commerce transactionsThese were sent to a BNPL platform.
The market has seen major companies jump into it, such as PayPal Square Mastercard
Although BNPL companies claim that their offering is a better alternative to credit card, critics fear they might encourage consumers to spend more than what they have the means to pay. These services may also be used to create debt awareness, which could lead to users becoming unaware of their financial responsibilities.
Regulation in the U.K. has been concerned by the industry’s rapid growth during the coronavirus epidemic. A consultation by the British government on their plans is scheduled to be released later in this month.
Sebastian Siemiatkowski CEO Klarna admitted that last month the company was “[.could have done a better jobThe U.K. is putting emphasis on credit areas.
Siemiatkowski released a Monday statement saying that although most people would prefer to use their money, “we believe strongly” in the value of credit.
“The changes that we’re announcing today allow consumers full control over their payments regardless of whether or not they pay it now.
Klarna, which is a registered bank in Sweden has received $3.7 billion of funding so far from international investors, including Japan. SoftBankChina’s Ant Group (China) and Snoop Dogg, the U.S. rapper. This firm was last valued at nearly $46 billionIt is anticipated that the company will go public within the next year.