Myth: Klarna hypnotises you into thinking you’re not spending real money.
Truth: Credit is not a new concept and, as Chris Woolard noted in the opening paragraphs of his report on regulation, “Credit makes economies work and has a social purpose”.
What Klarna offers is a fairer, more transparent way to pay, without interest or late fees on our Pay in 3 instalments and Pay in 30 days products. For many, this is safer than traditional models which fund interest free credit for the rich by charging interest and late fees to those less able to manage their money.
Our retail partners are supporting our ambition to make this positive change and consumers clearly recognise the benefits too as they are rewarding merchants which offer buy now pay later by shopping with them. A recent survey from Finder.com actually found that 9.5 million UK consumers would actively avoid retailers that don’t offer buy now, pay later on their site.
At Klarna, our commitment to our consumers is to always be transparent and up front about our products. That’s why we are clear at the check-out that this is a credit product and there are consequences to non-payment.
We are also very careful with our underwriting, only lending to consumers who we believe can and will repay, and promoting responsible spending. That’s why we conduct an eligibility check (a soft credit check for Pay later and Instalments, and a hard check for Financing for larger purchases) each and every time a consumer makes a purchase with us.
We don’t want consumers to overspend; we want them to use our products to better manage their finances and add extra flexibility to their spending, the majority of which will be on a debit card.
The fact that over 90% of consumers pay their Klarna bill with a debit card, and our extremely low default rates suggest to us that this is how consumers do use our products. Additionally, surveys have shown that two thirds of the value of purchases made through BNPL in the past year would have been made regardless of the option to defer payment through a BNPL service.