Klarna is to launch a ‘buy now, pay later’ (BNPL) physical card in the UK, sparking more warnings from consumer bodies over people getting into debt problems.
The new card allows shoppers to delay payments for up to 30 days when used in high street shops, with BNPL products previously only offered online in the UK.
The unregulated BNPL product needs more safeguarding to protect British consumers who may be racking up debt, by postponing payments, without realising, consumer lobby group Which? said.
"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," Myron Jackson, personal finance campaigner at interactive investor, said.
If they fail to repay in time, customers will be charged high-interest rates, late fees or be turned over to debt collectors, which could be detrimental to credit scores.
The Swedish company has a 400,000 people waiting list in the UK, it said, revealing the “strong demand for a new approach to credit,” after a successful launch in Germany and its homeland.
It plans to add further payment options further down the line including split purchases via three monthly payments.
Klarna Card offers delayed payments without incurring interest charges or late fees (should it be repaid on time), while consumers will require a background credit check before being accepted.
“For online purchases where credit makes sense, buy-now-pay-later has become the sustainable alternative with no interest and clear payment schedules,” Alex Marsh, head of Klarna’s UK operations, said.
The company said shoppers will get a personalised cap on spending, which is automatically adjusted after purchases based on their financial track record, with it likely to be hundreds of pounds rather than thousands.
Monzo became one of the first UK banks to offer in-person BNPL services in September, but its cap on spending is £3000 – well exceeding the estimates for Klarna’s.
Meanwhile, Paypal began offering the service to UK shoppers in the latter parts of 2020.
In February 2021, the government announced its intention for BNPL to be regulated by the Financial Conduct Authority to protect consumers from “potential for harm,” The Guardian said.