Over the past few months barely a week has gone by without comment and debate over the rapid growth of the ‘buy now pay later’ sector in the UK. As often happens, innovation has been a few steps ahead of the regulation in this sector and many are now asking whether the sector should be further regulated.
As the market leader in this area, we are often asked for our view. You can watch me talk about it here, but I thought it would be helpful to lay out our position below.
Consumers’ needs are changing.
Consumers want to bank, shop, save and pay in new ways. When it comes to paying, the ‘buy now pay later’ option has become increasingly popular with consumers as they move away from traditional forms of credit.
As the ‘buy now pay later’ sector has grown, it has become more complicated. There are more providers to choose from when customers reach the checkout, each with its own approach to how and when customers pay, interest and late fees, eligibility assessments, support for vulnerable consumers and, crucially, protection for when something goes wrong. Consequently, it can be a minefield for consumers when it comes to making the right choice.
Consumers deserve the highest level of protection.
The DNA of Fintech is innovation, and as more and more players come into this space, regulation will play a crucial role in ensuring that innovation is matched by good customer outcomes. At Klarna we are customer obsessed and will always advocate for the consumer – something you can read about in Our Promise. Consumers deserve the highest protections no matter what provider or product they choose.
We believe that proportionate regulation and consumer protections should be updated for the digital age rather than relying on rules conceived nearly 50 years ago. This is why we believe it is right that the FCA should review how the sector is regulated – not only to support consumers now, but also to protect them in the future as the sector continues to innovate.
Transparency is key, so customers are clear about any fees or interest, when payments need to be made and what could happen if payments are missed. All providers should be performing eligibility checks to ensure that they are only lending to people who they believe can and will pay. If consumers are not happy with how a complaint has been resolved, they should have the right to ask for independent review. They should also have the same purchase protection rights regardless of the type of credit they’ve used.
As a fully licensed bank, Klarna offers a wide range of products, including Financing which is regulated by the FCA. We already operate to very high regulatory and operating standards in the UK which we apply across all our products. However, while some of our products fall under the consumer credit act, others are not covered under current regulation – much of which was created nearly 50 years ago and isn’t designed for the digital age.
We are committed to working with the industry.
At Klarna, we are fully committed to partnering with UK regulators, industry associations, debt charities and consumer groups to help shape regulation in this sector to protect consumers long into the future.