At Klarna, we are customer obsessed and are determined to provide the best way to shop, bank, and pay for everyone. We believe in offering an interest-free, zero fees, buy now and pay later service (BNPL) that does not affect your credit score.
We are growing quickly in the UK and regularly speak to our consumers for their feedback and advice to ensure we provide the best and most transparent shopping service. We have made it clear that we support BNPL regulation with open arms and accept the ASA advice on ensuring that we advertise clear and concise information on our service: flexible credit and payment solutions.
However, as we promote a clear messaging in our marketing, social media, and communications on Klarna, we had a thought: why are credit card companies not doing the same? Aren’t we both providing a credit service?
(American Express and Virgin Money speaking about rewards on Instagram with no T&C’s on the credit product.)
In contrast to Klarna’s Pay later solutions, which are fully funded by our retail partners, credit card companies make the majority of their revenue from vulnerable consumers who cannot pay off their full balance quick enough or are charged higher interest rates because they are considered “higher risk” borrowers.
Although we are happy to, it seems structurally unfair that the banks can advertise their credit products without the additional information that allows consumers to understand all the T&C’s. And Klarna, a free of interest and charges credit service provider, have to. None the less, this becomes even more clear as to why consumers are now favouring alternative forms of credit such as BNPL.
(American Express on ‘sponsored media’ ads and posts with no T&C’s on the credit product.)
We estimated that by using BNPL instead of credit cards, UK consumers saved £76 million in interest charges alone in 2020. By contrast, last year, credit card companies charged UK shoppers over £5bn in interest. So, yes, we were indeed surprised to see that many of their ads and communications don’t display clear T&C’s nor explain that they are offering a credit product.
We believe consumers deserve a better system with fairer conditions for all and more transparency. That’s what we stand for at Klarna and why we are calling out banks to become more transparent to consumers.