Klarna – The Key Points
Positives:
- Klarna is a stable company with a long history.
- Klarna do not hold your funds, but rather you pay via them so there is no risk to your money.
Potential Concerns:
- When you make a purchase via Klarna, you are effectively paying via a third party. Therefore your purchase is not covered by Section 75 of the Consumer Credit Act, which means that you do not have as many rights in law as you would if you had purchased the item directly.
- Klarna is effectively giving you a line of credit when you buy something via them. If you do not pay back the amounts due or if you pay late, then this can affect your credit rating, and Klarna will employ debt collectors to recover the debt.
- Klarna’s main products are not currently regulated by the Financial Conduct Authority in the UK.
What Is Klarna?
Klarna is a Swedish company, founded in 2005. They entered the UK market in 2012, and launched their Buy Now Pay Later (BNPL) product in 2017.
Their main product is their BNPL offering. This allows customers to pay with Klarna at retailers that support it. The customer get the product straight away, but then can pay at a later date i.e. 30 days later, or in 3 installments, with no interest added.
Is Klarna Safe – The Details
Regulation:
As a Swedish company, Klarna are regulated by the Swedish financial regulator. Buy Now Pay Later products are not currently regulated by the Financial Conduct Authority (FCA) in the UK, so they do not regulate Klarna. Currently the FCA are looking into bringing in regulation for these products.
Protection/Insurances:
When you make a purchase via Klarna, you are effectively paying via a third party. Therefore your purchase is not covered by Section 75 of the Consumer Credit Act, which means that you do not have as many rights in law as you would if you had purchased the item directly.
Credit Risks:
The rise in BNPL providers in the UK has given rise to some concerns. Some have expressed that it is not clear enough that Klarna and their competitors are in effect giving out credit, and it encourages people to get into debt.
Before using Klarna or any other BNPL provider, users should be clear that they are taking on debt, and that they should ensure they are able to make the repayments. If users miss or are late with payments, it can affect their credit rating of lead to having to deal with debt collectors.
Company:
Klarna was first formed in Sweden in 2005, and since then has launched in over 45 countries, including the UK, USA, and in much of Europe. They have received large amounts of funding, and in the last round of funding they were valued at over $45 billion, making them one of the highest valued fintech companies in the world.
Data Security:
If you use Klarna, they will gather certain information from you such as personal details, purchase history and payment history. Klarna state that this data is protected by high levels of security and encryption, and they follow fully all GDPR rules.
Resources:
Trustpilot
https://www.trustpilot.com/review/klarna.com
https://www.reddit.com/r/klarna/
Is Klarna Legit?
Klarna’s BNPL product can be very useful for delaying payments for purchase. However, uses should be very aware that this is a credit service, and that they should ensure they have the funds to cover all purchases, otherwise it can cause issues with your credit rating.