27 Apr 20231 min read

European consumers deserve better regulation.

Klarna K logo

by Klarna

[Klarna’s Chief Financial Officer Niclas Neglén spoke on April 26 at the Eurofi conference in Stockholm on the topic of ‘Digitalisation of EU financial services: are EU digital regulation and supervision up to the opportunities and challenges?’. A version of this blog originally appeared in the EuroFi Magazine.]

Digitalisation has revolutionised the financial services industry, offering more sustainable credit, new payment options, and healthier financial tools to European consumers. This innovation has reduced costs, sped up access to capital, improved transparency, and promoted financial inclusion in the sector. Despite these accomplishments, there is still more to be done.

The $16 trillion-dollar global payments industry costs society an astonishing $440bn annually. At Klarna, we’re taking on the challenge of transforming this industry. Our mission is to help restore the original purpose of payments and banking: putting the customer first. We help people save time, manage their money, and worry less by prioritising consumer choice, transparency and cost-effectiveness.

While we welcome and appreciate the European Commission’s important work and efforts to adopt the digital finance package and revise consumer credit rules, payment services, and open finance, among other digital policies, we believe that upcoming regulatory frameworks must not hold back on Europe’s promise of championing digital transformation of the financial sector.

European consumers deserve better
We recognise that consumers’ financial preferences and needs are changing, especially with the cost of living crisis raging and prices at a 40-year high. We understand that people are becoming more conscious of their finances, finding ways to save money and exploring better alternatives to personal loans which can charge up to 48% in interest. Access to affordable alternatives to high-cost credit is more important than ever. It is no surprise that consumers of all ages and demographics are turning to interest-free BNPL, a more fair and transparent option that can put more money back into their pockets.

At the same time, incumbents and big tech companies are locking away consumer’s data, limiting the ability to choose the products and services that suit their needs and who to share their data with. Consumers are unsurprisingly frustrated with the lack of access to financial services that match their lifestyle, accessible across platforms and borders. At Klarna, open banking is part of our DNA, with over 15,000 global bank connections, we view it as the future of banking, offering increased choice and better value to everyone.

Finally, we are seeing fundamental shifts in what retail banking would look like by using AI. Klarna is the first European bank to integrate AI capabilities allowing us to leverage the best technology and data to help our customers save time, save money and worry less, delivering real value to society.

An opportunity to get it right
Europe now has a unique opportunity to boost its competitiveness by spearheading an ambitious digital finance agenda. This is a pivotal moment, and it is crucial to make sure that upcoming digital policies avoid regulatory gaps and are designed with the future in mind, for both businesses and consumers alike.

Successful EU policy should focus on promoting mobility and choice, regulating outcomes instead of inputs, and maintain proportionality to risks. It is also important that new regulation takes into account new business models. By doing so, regulatory compliance frameworks will be simplified and more coherent, unlocking the potential for growth-driven innovation. This is not about reducing regulation – it is about making EU regulation more effective and fair. We embrace regulation that sets a standard for providers to meet without specifying how those standards should be met, motivating the industry to put the customer first and drive better outcomes for them.

Looking to the future
To become a thriving digital finance hub, the EU needs to opt for smarter regulation, particularly concerning the data that consumers may want to share and the possibilities that may arise from it. A customer-centric Open Finance model will empower consumers to control their data and decide who is granted access. With the PSD2 reboot and the Open Finance framework, the European Union has a huge opportunity to redesign a regulatory environment that enables local fintechs to compete, innovate, and deliver maximum value for European consumers; in turn accelerating healthy competition within Europe.

We advocate for data mobility that’s free of charge, easy to execute, and readily accessible for all consumers. We believe this should be at the heart of the revision, enabling much-needed new and innovative services to deliver the best outcomes for consumers and society, and fostering healthy competition in traditional banks across Europe.

As Klarna strives to put customers at the forefront of everything it does, we call on Europe to establish a regulatory framework that supports the digital transformation and innovation of financial services through outcomes-based regulation.

Copyright © 2005-2023 Klarna Bank AB (publ). Klarna Bank AB (publ) is authorised and regulated by the Swedish Financial Supervisory Authority. Deemed authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website. Klarna Bank AB offers both regulated and unregulated products. Klarna’s Pay in 3 instalments and Pay in 30 days agreements are not regulated by the FCA. Klarna Bank AB (publ) registered and head office: Sveavägen 46, 111 34 Stockholm, Sweden. A Swedish public limited company (publikt bankaktiebolag) registered with the Swedish Companies Registration Office with organisation number: 556737-0431.