Klarna, a global retail bank, payments and shopping service, has announced a package of changes to expand and strengthen it’s UK offering to give consumers more choice, clarity and control over how they pay.
‘Pay Now’ ensures UK consumers can always pay immediately and in full, wherever Klarna is available, with the same payment experience whether they choose to pay now or later. And in its continued drive to set standards for the UK payments industry, Klarna is also strengthening affordability checks, simplifying checkout language, providing more ways of fair redress for consumers on the rare occasions where necessary, and removing the last remaining late fees on its regulated financing product – all with immediate effect.
Putting consumers in control whether they pay now or pay later
While it is best known for Buy Now Pay Later in the UK, globally Klarna offers a wide range of payment and shopping services and its ‘Pay Now’ immediate payment option is extremely popular globally. Klarna’s UK payment and shopping options will now be consistent with those offered globally across 20 markets, giving consumers more choice, clarity and control over how they pay.
Sebastian Siemiatkowski, Klarna’s Co-founder and CEO said: “We firmly believe that most of the time, people should pay with the money they have, but there are certain times where credit makes sense. In those cases, our BNPL products offer a sustainable and no cost healthy form of credit – and a much-needed alternative to high cost credit cards. The changes we are announcing today mean that consumers are fully in control of their payments whether they pay now or pay later.”
Pay Now is launched alongside a package of consumer-focussed changes to drive up standards across the UK consumer payments industry. Central to this, Klarna has begun to leverage its own well established Open Banking services, already connected to over 6,000 banks across 20 countries, to help support even better real-time lending decisions. In addition to the robust credit checks which Klarna performs on each and every purchase, consumers will be able to securely share income and spending data from their bank accounts to confirm they can afford future repayments. This supports Klarna’s commitment to financial inclusion by giving safer access to credit for those individuals with a limited conventional credit history, which is reliant on the use of credit cards and does not reflect how people are choosing to make payments today. Crucially as a complement to this, Klarna continues to drive innovation and change with the UK Credit Reference Agencies to enable all buy now pay later (BNPL) providers to share their data and reward the vast majority of Klarna customers who use BNPL responsibly with improved credit scores, and further protect consumers from accumulating debt.
As part of continuous efforts to lead the way on transparency and protection for consumers throughout their shopping and payment experience, Klarna has recently further strengthened the language visible at check-out to make it absolutely clear that BNPL options are credit products, with consequences for missed payments. It has also worked together with the consumer group, Fairer Finance, to make sure that Terms & Conditions are clear, simple and easy to understand. Additionally, Klarna has established its own complaints adjudicator for more ways of fair redress for consumers, having been informed by the Financial Ombudsman Service (FOS) that BNPL products couldn’t currently be referred on a voluntary jurisdiction basis. Up and running for over 6 months now, this service is providing valuable recourse for consumers on the rare occasions when they are not happy with the way a complaint has been handled.
Finally, Klarna has never charged late fees on its Pay in 30 or Pay in 3 BNPL products in the UK. From today, the company will now remove any remaining late fees from its regulated Financing product, which consumers use to spread the cost of higher value purchases over 6 – 36 months. This change drives better outcomes for consumers and means that whatever Klarna product they choose to use, they can be confident there will be no late fees.
A step forward
Commenting on the launch, Myron Jobson, Personal Finance Campaigner, interactive investor, said: “Klarna’s new ‘Pay Now’ feature is a positive first step forward for the Buy Now Pay Later (BNPL) industry which is ripe for further regulation. BNPL services have become like a drug for many consumers, particularly young adults, used to buy coveted clothing and must-have gadgets owned by their idols without having the cash in the bank to fund these purchases in full.
“The introduction of Klarna’s ‘Pay Now’ feature comes just over a month after Citizens Advice published research which found that one in 10 BNPL shoppers have been chased by debt collectors, rising to one in eight young people.
“The very existence of this form of lending flies in the face of the age old yet still important and relevant financial lesson of spending within your means – a lesson worth remembering amid the rising cost of living, compounded by bumper energy bills.
“The BNPL market is now too big to overlook, with the use of such products having nearly quadrupled in 2020 to reach £2.7 billion, according to the City watchdog. Regulation can’t come soon enough.
“The explosion of this form of lending in recent history underlines the importance of financial education from a young age. While it might be tempting to delay payment – and BNPL adverts can be very enticing and sometimes misleading – it can be a slippery slope into debt.
“While debt is not inherently bad, knowledge on how to get a handle on it is crucial. BNPL firms should make it crystal clear to customers that they could be referred to debt collectors and their credit scores could be tarnished if they miss payments.”