Buy Now Pay Later firm Klarna claims ‘credit cards pose the real risk’
Buy Now Pay Later (BNPL) fintech Klarna has looked to shift criticism onto credit card providers as Government prepares to clampdown on BNPL providers, reveal documents released today.
BNPL firms have come under fire in recent months over fears that they are ladening unknowing shoppers with dangerous debt, and the Government has been consulting on how to regulate the sector.
But Klarna’s submission to the consultation, made public today, claims that traditional credit providers posed a greater threat to consumers.
The documents said: “The best consumer for Klarna is one who uses BNPL for a purchase and then pays on time and in full.
“This is the absolute opposite of credit card providers and revolving credit products, whose most profitable consumers are those who stay in debt.”
It claimed that “there is clearly greater risk of consumer harm from spending on credit cards.”
But consumer watchdog Which? issued a warning this week that that the speed and simplicity of BNPL at checkouts contributed to users’ misunderstanding that they were taking on debt.
In-depth interviews with 30 BNPL users found that three-quarters of those described BNPL as a “way to pay” or a “money management tool” rather than a form of credit, with one user saying: “It just asks a few questions so it doesn’t feel like you’re committing to a credit agreement.”
The consultation into how to regulate the sector was opened following a review last year by former Financial Conduct Authority (FCA) boss Chris Woolard which found that change was “urgently needed” to protect consumers.
Alex Marsh, Head of Klarna UK, told City PM in a statement: “The HMT consultation is an important step forward in regulating BNPL, which we have long called for stronger safeguard yesterday as it warned.
“At Klarna we have not waited for regulation; we already operate to the highest standards, including making it absolutely clear at the checkout and in our Ts and Cs that we offer interest free credit products along with upfront repayment plans and the consequences of missed payments.”
Marsh said that rules were “badly needed” as banks begin to enter the BNPL space, “bringing with them dirty tricks and double-digit interest rates.”