People are rapidly changing the way they bank, shop and pay. Consumers want to use their own money to shop but for certain kinds of purchases to split the payments over time. They want payment methods that are clear and helpful, without hidden surprises or the possibility of building up large debts. Consumers in the UK are increasingly choosing Klarna because they value the combination of transparency, flexibility, control and purchase protections.
Our most popular ‘buy now, pay later’ (BNPL) products – Pay in 3 instalments and Pay in 30 days – in the UK charge no interest or late fees and offer a clear and structured payments schedule over 2 months or less. Simply put, the cost of the item you purchase is the amount you pay when using these payment options. Never any more.
We assess eligibility on every single transaction and consumers who miss payments are restricted from using our service. We also have budgeting and spending insights tools, help consumers manage returns with retailers and have buyers’ protection if something goes wrong with a purchase.
We agree that regulation has not kept pace with new products and changes in consumer behaviour – existing legislation on consumer credit dates back to 1974. This is why we welcome the outcome of the Woolard Review into change and innovation in the unsecured credit market. We have engaged extensively with the Review and fully support modernising regulation and supervision in this emerging and increasingly popular sector. Consumers are voting with their feet by choosing alternative payment methods and we expect the BNPL sector to continue growing, increasing the importance of appropriate regulation.
It is essential that regulation is modern, proportionate and fit for purpose, reflecting both the digital nature of transactions and evolving consumer preferences. Given the existing regulation in this area is nearly fifty years old, a comprehensive update to this entire framework reflecting consumers’ changing needs is in our view the right thing to do.
As a fully licensed bank and payments service provider in the UK, we hold ourselves to the highest standards for our consumers and believe regulation is key to raising standards across the industry.
We would like to see robust regulation for the buy now pay later sector that:
- Guarantees transparency for consumers to ensure they fully understand what interest, late fees and / or payment schedules they are committing to (though Klarna charges no interest or fees on our Pay in 3 instalments and Pay in 30 days products).
- Ensures all providers perform strict eligibility checks, and have access to accurate information on consumers’ use of these products, so the services are only offered to consumers who can pay.
- Gives consumers the same purchase protection regardless of the type of product they’ve used, whether this relates to the quality of the product and right to return, or to the help available for unexpected financial hardship.
- Enables consumers to take complaints to the Financial Ombudsman Service or similar service regardless of whether a product charges interest or not.
It is our priority to work with the FCA, the UK Government, Parliament and industry associations to help create a new regulatory framework that protects consumers and supports further innovation in payment options for consumers. We will listen to our consumers and continue to innovate and improve our products in a way that puts their best interests at the heart of what we do now and long into the future.