Klarna to Report Payment Performance of Users to Credit Agencies

By Tom Metcalf

 Klarna will begin reporting the use of “buy now, pay later” products to U.K. credit reference agencies, which could see the increasingly popular mode of financing impact the credit ratings of users.

A Klarna app logo on a mobile phone arranged in London, U.K., on Thursday, Jan. 21, 2021. Klarna AB, a Swedish payment provider for online shoppers, is still setting its sights on an initial public offering even after its latest funding round left it roughly twice as valuable as it was a year ago.

The reporting will be effective on all new purchases made in the U.K. using services including Klarna Pay in 3 and Klarna’s payment card from June onwards, the fintech said in an emailed statement Wednesday. Klarna will report payment performance to Experian and TransUnion, and the information will appear on a U.K. consumer’s credit report.

The move comes amid increased scrutiny from U.K. regulators, who are concerned about money-laundering and the cost of credit. The U.K.’s Financial Conduct Authority said in 2021 it will start regulating the interest-free buy-now, pay-later sector as their use soars.

Fintech firms such as Klarna and Afterpay Ltd. have grown into multi billion-dollar companies by offering online shoppers the option to pay in installments. Buy-now, pay-later, or BNPL, specialists have already diverted as much as $10 billion in annual revenue from banks, according to research in July by McKinsey, and traditional financial giants including Goldman Sachs Group Inc. and Mastercard Inc. are trying to muscle in on the market.

More stories like this are available on bloomberg.com

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