On Monday, Europe’s most valued private fintech company Klarna announced that it will be making a set of changes to its product in the UK following an imminent regulation of the booming buy-now-pay-later industry in the country. The company plans to make these changes ahead of time so that it’ll be out of regulators’ radar when the country begins to tighten regulation on the buy-now-pay-later sector.
Known fully as Klarna Bank AB, Klarna is a Swedish fintech company that provides online financial services such as direct payments, post-purchase payments, and online storefronts. The fintech company is known mostly for its buy-now-pay-later scheme which allows people to make purchases of goods and services and pay for them later. Founded by Sebastien Siemiatowski, Niklas Adalberth, and Victor Jacobson, Klarna has its headquarters in Stockholm, Sweden. The company serves different areas and countries across Europe and has an approximated amount of 3000 employees with most of them working at the company’s headquarters.
Stronger credit checks are one of the biggest changes that Klarna will be introducing. According to Klarna, the new tool will enable users to be able to share income and spending data from their bank accounts which will determine if they can afford future repayments, and according to a spokesperson from the company, this feature is not compulsory and can only be used if users choose to do so. This is a completely new feature because unlike providers of credit cards and traditional banks, the fintech company does not conduct hard credit checks on their customers. This means that their credit score should not be accessible as part of their credit history.
Klarna is also providing its customers with a feature that’ll allow them to be able to make instant payments for things at once as well as make its checkout more user-friendly by providing clearer information regarding loans and repayments.
The buy-now-pay-later sector is booming following its success as a result of the coronavirus pandemic. Critics, regulators and some individuals are however worried that these credit providers may be encouraging people to spend more than they earn or can really afford, hence the call for regulation. Major global companies such as PayPal, Square and even MasterCard have launched into the buy-now-pay-later sector, and many others plan on leveraging the opportunities that lay within the sector. The British government is expected to release its plans regarding the sector later this month.
A Monday statement by the company’s CEO Sebastian Siemiatkowski said that “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”. Last month, he said that the company could have performed better in the UK by targeting other areas apart from credit.
“The changes we are announcing today mean that consumers are fully in control of their payments whether they pay now or pay later”, his Monday statement read.
Klarna is one of the biggest fintech companies in Europe. The company has, in total, raised $3.7 billion from globally recognized investors like SoftBank and Ant Group, and was last valued at $46 billion. The company is expected to go public soon but last month, the company’s CEO said that this may be delayed out of fears of volatility in the stock market. “The volatility in the market right now makes me nervous to IPO, to be honest. I think it would be nice to IPO when it’s a little bit more sound. And right now it doesn’t feel really sound out there”, CEO Sabastian Siemiatkowski said.
Klarna remains one of Europe’s biggest fintech companies providing buy-now-pay-later services that allow shoppers to split their purchases into monthly instalments, typically interest-free.