Have you ever used a credit card and then later realised that the amount you owed just kept growing from fees and interest because you didn’t pay off the entire balance? You are not alone. The FCA* estimated that in February 2020, 2.8 million adults in the UK had ‘persistent credit card debt’ and paid ‘more in interest, fees, and charges over the previous 12-18 months than they had actually paid off on their card(s)’. We find these results extremely worrying and are not surprised that credit cards are falling out of favour as consumers look for better ways to pay.
As more and more people are looking for alternatives to credit cards, the number of firms offering buy now, pay later (BNPL) is growing fast. At Klarna, our most popular Pay later products give consumers short-term flexibility with no interest and without fees, even if a payment is late. However, BNPL is a relatively new space and as the rules and regulations for the sector are still being defined, different companies have different approaches to interest, fees and payment schedules. This is, in part, what the FCA will be looking at over the coming months.
At Klarna, we are customer-obsessed which means that our customers’ best interests always come first. We are 100% committed to delivering better consumer outcomes, being 100% transparent, and ensuring you are protected if things don’t go according to plan.
Our commitment to transparency.
We commit to being fully transparent and responsible in our communications so that you can make decisions which are right for you. When you make a payment with a retailer that uses Klarna at the checkout, we clearly highlight that our Pay later solutions are a credit product and that there are possible consequences for non-payments. We are transparent about these consequences in our FAQs. To promote responsible spending, we have recently included new ‘Please shop responsibly’ messaging on our on-site messaging and in paid promotions of our BNPL products.
Additionally, we work closely with our retail partners to ensure they meet the same high standards in transparency and responsible communication. We are proud to say that we have also worked with Fairer Finance on our guidelines for merchants, to make sure the consumer’s best interest comes first.
But we believe transparency goes beyond what we do here at Klarna. The wide range of options available at checkout can be very confusing for consumers when it comes to choosing what best fits their needs and also what they are signing up for.
Just have a look at this table which outlines the differences between the main BNPL players in the UK.
There are wide differences between different providers. Depending on what you choose, you might need to pay 1, 2 or even 4 instalments within a month from making the purchase. And if you miss a payment, you could be charged between nothing (Klarna!) and up to £36. As this information isn’t always clear, this could ultimately result in disappointment or frustration from the consumer – which we never want to happen.
But how can retailers communicate this complexity at checkout without confusing consumers even further? Well, we’ve found a way. We mocked-up a simple, clean checkout experience which provides consumers with the key information they need to make a well-informed choice.
How it looks today – What it should look like
We believe that being clear and straightforward about how the different BNPL options work can only be win-win for both consumers and retailers. That’s why we are calling on our retailer partners and the BNPL industry to bring more transparency and integrate this information on their checkout or landing pages.
Our commitment to protecting customers.
When you use Klarna, we always have your back. Our Buyer Protection Policy protects you on the rare occasion that something goes wrong. We also have a dedicated protection policy and team to help in case of fraud.
But we don’t stop there. We believe that consumers should have the opportunity to escalate complaints if they aren’t happy with how they were handled. We get 4 complaints per 10,000 orders which is phenomenally low for the financial service sector but our ambition is to get this to zero.
For those very few times when we do receive a complaint, we want to ensure that consumers are fully supported throughout their journey.
We have appointed an internal Klarna Complaints Adjudicator who sits outside of our standard complaints structure and is a point of escalation if consumers are not happy with how their complaint has been handled and want to request an impartial review (read more here). They will assess complaints that have been referred to them for review, suggest improvements to our case handling, and ensure that we always act fairly and in accordance with our Complaint Handling Procedure.
We have taken all these steps, and we will continue to take more, to make sure our customers have the information they need to make well-informed and responsible choices and that they are fully protected when making a purchase. This lies at the core of Klarna’s smoooth shopping experience.
*(FCA Financial Lives 2020 survey: the impact of coronavirus)