Klarna to report ‘buy now, pay later’ use to UK credit agencies

Swedish fintech Klarna will start providing information to UK credit agencies on the use of “buy now, pay later” services, as part of efforts to address concerns about consumer financial wellbeing.

The move by the business, which was last valued at $45.6bn in June, comes ahead of potential action by policymakers worried about rising consumer debt, and competition from a growing number of banks.

BNPL providers, like most lenders, are not currently required to share information with credit agencies, which collate data from banks and other credit providers.

A review commissioned by the UK Financial Conduct Authority warned last year that the lack of reporting could make it harder for lenders to assess whether customers could afford their products.

Starting in June, Klarna will report information to Experian and TransUnion on timely and late payments as well as unpaid purchases. This data will appear in credit reports but Klarna said it would not yet affect credit scores.

The company said it had worked with the agencies over the past two years to update their systems to process BNPL data.

“We are pleased to help protect our UK customers and continue to cement our leadership in responsible lending, now the credit reference agencies are in a position to accept our data,” said Alex Marsh, head of Klarna UK.

In April, BNPL provider Zilch said that it was partnering with Experian to share information and would use credit agency data to help assess customers’ suitability for loans.

The BNPL sector has grown rapidly, with researchers estimating the UK market was worth £5.7bn in 2021, more than double the FCA’s estimate for 2020.

That has drawn increasing regulatory scrutiny particularly, for its effects on consumer safety. A third of 18-to-34 year olds who used BNPL said they had been charged late payment fees, according to research commissioned last year by financial literacy charity The Centre for Financial Capability.

In February, the FCA said it had required four BNPL services to redraft terms, including those allowing them to terminate, suspend or restrict access to customer accounts for any reason without notice.

The Treasury launched a consultation on the sector last October. The FCA has said it plans to consult on regulating BNPL providers this year after the Treasury review is completed.

A number of banks have announced BNPL services in recent months, with Santander launching Zinia in Germany in January. NatWest, Barclays, Virgin Money, Monzo and Revolut also have instalment or BNPL products either under development, at a trial stage or currently available.

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