Klarna: We tightened our locked out loans

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“Buy now, pay later” allows customers to delay payment or split it into smaller installments


Buy now, pay for service later Klarna boomed during the foreclosure of Britain.

This includes a 105% increase in the number of running shoes purchased using its services, a 60% increase in sales of beauty products and a “significant increase” in purchases of bicycles and cycling accessories.

“We have seen our volumes increase over this period, simply reflecting the increase in digital transactions in general,” Luke Griffiths, vice president of Klarna, told BBC Radio 5 Live’s Wake Up To Money.

However, as sales increased but more buyers faced the financial uncertainty of foreclosure, the company has tightened its lending rules.

“Obviously, as people’s finances have changed over this time, we have constantly reviewed our policies regarding the type of client we accept,” Griffiths said.

  • The rapid rise of ‘buy now, pay later’
  • “Buy now pay later messed up my credit score”

He says the company is now only accepting customers who it believes will be ready and can repay on time.

As a result, he does not think that Klarna will see an increase in defaults, despite the increase in financial difficulties

« [Klarna’s] the default rate is less than 1% and we work very hard to make sure that we only accept customers who can pay over time.

“In fact, it will be at the beginning that we reject consumers because we don’t think they will be able to pay, rather than at the back end which are the customers who cannot pay. “

Klarna is just one of many purchased now, paid for later services that have grown tremendously over the past few years.

It is used by eight million customers in the UK alone and is often displayed as a payment option on the websites of its many trading partners. The other main players in this growing market are ClearPay and Laybuy.

Earlier this year, a report from payment company Worldpay suggested that these types of deferred payment services were growing at a rate of 39% per year and were expected to double their market share by 2023 compared to 2019.

This means that ‘buy now, pay later’ services are the fastest growing online payment method in the UK, growing twice as fast as bank transfers.

“Really think about affordability”

But some consumer groups and indebted charities have expressed concern over this growing trend to delay payments.

Sue Anderson, of the debt charity StepChange, says they are seeing an increase in the number of people seeking debt help who have purchases in progress and pay debts later.

“Buy now, pay later is marketed hard to consumers for the sake of convenience,” she says. “That’s fine, but the conceptual problem is that deferring payment allows you, maybe even encourages you, to put off thinking about affordability until later.

“At that point, with the goods in hand, it may be less likely that you will go through the decision process to refuse and return them. This is not necessarily helpful if your finances are depleted and if you would have otherwise decided not to buy. ”

She says using Buy It Now, Pay Later is unlikely to be the only cause of someone’s debt problems, as problems are more often caused by a sudden loss of income. However, she says that she is starting to see more clients who owe money on this basis, that is, when “they turn to us”.

If you are worried about any type of debt, help is available. Citizens Advice has expert money advisers, while other organizations can help: StepChange, Christians Against Poverty, Debt Advice Foundation, National Debtline, and the Debt Support Trust.

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