The news: Buy now, pay later firm Klarna made a number of changes to the way it conducts business in the UK, per a press release.
Here’s what you need to know:
How we got here: Last year, almost half of UK BNPL users between the ages of 18 and 34 said they missed a BNPL payment, according to a November 2020 Capco report.
Some BNPL firms have also engaged in controversial marketing tactics: In December, the UK’s Advertising Standard Authority banned a social media campaign run by Klarna that urged customers to splurge as a means of self-care during the pandemic.
Amid mounting concerns regarding the financial risks involved with BNPL, the UK’s Financial Conduct Authority (FCA) announced in February that it would regulate these products—which 54% of UK consumers wanted, per the Capco report—and called for BNPL firms to carry out customer eligibility checks.
The big takeaway: Adding customer safeguards on top of government BNPL mandates can help Klarna avoid regulatory heat and might also help it gain more trust among consumers. Given the surge of banks entering the BNPL space, Klarna may also be trying to stay on par with these institutions, which are already subject to stringent consumer credit oversight.
What’s next? Klarna may decide to roll out the same initiatives in other markets, like Australia, especially as BNPL regulation takes shape globally. Making these changes ahead of formal regulation could help Klarna stand out from incumbent rivals like Afterpay or Affirm and potentially lead more customers to use its products.
Related content: Check out our chart report on global BNPL use and growth—and how regulation may affect the space.