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Inside Klarna
May 10, 20213 min read

Discover the truth: Klarna lends responsibly.

Klarna K logo

by Klarna

Myth: Klarna is a sugar daddy, there’s no end to the generosity.

Truth: Did you know…Consumers paid off £10 billion worth of credit card debt in 2020. So it comes as no surprise they have also been turning away from credit cards for more than 10 years.

As FCA’s Chris Woolard noted in the opening paragraphs of his report ‘The Woolard Review’, “Credit makes economies work and has a social purpose.”

Klarna believes a better world is one in which debit cards and buy now pay later replace credit cards and other forms of high-cost credit. This is a better way to access credit than traditional models which fund interest-free credit to the rich by charging interest and late fees paid by those less able to manage their money.

People have no interest in paying interest – right?! 

When you pay with Klarna, there is a clear and simple process that provides you with the information you need to make the best choice for you. We make clear how much you’re spending, what you need to pay and when. The vast majority of our customers use Klarna to manage their finances and spending in a safe and sustainable way, making payments on time.

We also take care to make sure consumers should be using our products and services so that they can comfortably repay. Every time someone uses Klarna, we run an eligibility assessment on the transaction, including looking at their previous payments with Klarna and a soft credit check. Just because a shopper has used us once does not guarantee they will be accepted again in the future. We restrict access to our service if a shopper misses payments to prevent further purchases.

As well as our checks, we’re going further, to encourage our consumers to be mindful when they shop. Our biggest marketing investment of 2020 and 2021, is KlarnaSense – an initiative we developed specifically targeted at supporting responsible spending and reducing impulse shopping.

We also work with our merchants (retailers) to ensure they are communicating about our products in a responsible way. This includes clear communications guidelines which all our merchants must comply with. These guidelines are updated regularly and we constantly monitor our partners’ compliance with them. If we find instances where a partner is not meeting our expectations, we contact them immediately and help them to make appropriate changes to the way they communicate about our products.

Klarna now has over 14 million users in the UK who have discovered the benefits of BNPL and our great products. They use our products to delay payment until after their online order has arrived and they’ve checked it’s right for them. Alternatively, customers can spread the cost over 3 payments to manage their finances, with no fees or interest. 

Whatever the approach, Klarna gives consumers useful tools and plenty of information to manage their spending and payments responsibly!

According to our data, ~30% of people who use buy now pay later services would have used a higher-cost form of credit if BNPL was not available at the point of purchase.

Responsible spending is an issue across the industry, especially for providers of interest-bearing credit cards or overdrafts. A recent study by the FCA found that 2.8m UK consumers had persistent credit card debt because they were revolving a balance on a credit card and had paid more in interest, fees and charges over the previous 12 to 18 months than they had actually paid off on their card(s).