Online payment platform Klarna has obtained authorisation from the Financial Conduct Authority (FCA) to offer regulated credit and payment services in the UK.
This approval, crucial for Klarna's operations, comes as its temporary Brexit-related permission was nearing expiration, though the authorisation does not extend to Klarna's widely-used buy-now-pay-later (BNPL) loans.
This means that Klarna is not required to ensure that its BNPL products meet the FCA’s rules such as checking that a customer can afford to repay the loan.
Klarna, known for its extensive presence in the European banking sector, has launched various credit and card products in the UK in recent years.
The FCA's authorisation criteria focus on ensuring that interest-bearing loans are affordable and suitable for consumers, including provisions for those in financial difficulty.
These products are now fully covered under the FCA's regulatory umbrella. Despite this, Klarna continues to advocate for the regulation of its BNPL offerings.
British customers have been increasingly using unregulated BNPL platforms like Klarna to cover essential purchases during the cost-of-living crisis, but campaigners warn of mounting debt burdens associated with the payment model.
“Klarna has always operated under the oversight of the FCA, delivering our regulated products to a very high standard of customer care. As well as enabling us to continue to provide our regulated products, the FCA approval puts Klarna’s successful UK business on a secure regulatory footing ahead of the expected regulation of BNPL,” said Abby Vickers, head of Klarna’s UK division.
The development comes at an inflection point for Klarna after recently reporting its first quarterly operating profit in four years this November, boding well for its hotly anticipated initial public offering.
Klarna's valuation has been the subject of intense scrutiny after it was forced to slash its valuation by 85% to US$6.7 billion in a 2022 funding round, a stark contrast to its previous valuation of US$46 billion.