Swedish fintech giant Klarna will start reporting buy now pay later (BNPL) purchases made by UK customers to credit agencies next month, in a move that could affect the credit ratings of shoppers.
The new policy will see Klarna share customer purchase data with credit reference agencies Experian and TransUnion.
The move came from extended talks between Klarna and the credit reference companies, with the aim of reducing the risk of UK consumers taking on excessive debts as a result of the BNPL purchasing system.
BNPL is a system in which customers make payments in multiple instalments paid after the initial purchase. It has become hugely popular over the last few years, with more than 17 million people in the UK using the model.
However, BNPL has come under some criticism from MPs for encouraging consumers to take on unnecessary debt.
Historically, credit reference agencies would be unaware if a consumer has built up BNPL debt on top of other debts.
There have been calls from UK regulators for BNPL providers to adopt the credit reference policy. However, no official regulatory changes have yet been made.
The former FCA head Chris Woolard urged payment firms not to wait for official regulatory changes to be made to adopt customer credit protection policy last year.
Klarna described the decision to UKTN as a “pre-emptive move” ahead of regulation that it expects to come later down the line.
“This was a key area of concern highlighted in the FCA’s Woolard Review and we very much took to heart the advice from Chris Woolard at the time to, ‘not wait for regulations before making changes,” said Klarna UK head Alex Marsh.
The Swedish firm is one of the largest BNPL providers in the world, with around 13 million customers in the UK.
Customer credit scores are expected to begin being affected by the reported data around 18 months after the policy change takes effect.
Rival BNPL firms that do not report customer purchases may become the more attractive option for consumers that want to avoid affecting their credit rating. However, Klarna has told UKTN that it expects other firms to follow suit either ahead of official regulatory changes or after.
The post Klarna to report BNPL customer purchases to credit agencies appeared first on UKTN | UK Tech News.
