Swedish buy now, pay later (BNPL) company Klarna has been approved to offer payments and credit services in the UK after previously operating under temporary authorisation post-Brexit.
The new authorisation, provided by the Financial Conduct Authority (FCA), covers Klarna’s term loan, card, one-time card, in-store card and open banking-based payment services.
The Stockholm-headquartered fintech established a new UK holding company called Klarna Financial Services UK to secure regulatory approval.
It does not cover Klarna’s BNPL products as it is not under the scope of the Consumer Credit Act.
The government has yet to grant the FCA powers to regulate BNPL in the same way as other loan products. It outlined draft regulations earlier this year, but the Treasury is reportedly considering scrapping plans over fears it would harm the UK’s BNPL market.
Proposed new rules for the product include a requirement for firms to report BNPL transactions to credit reporting agencies and for providers to conduct credit checks on prospective customers.
The Labour Party has called for BNPL to be regulated in the same way as credit cards, a move welcomed by Klarna and other providers.
Despite the delay, the FCA last month enforced a requirement for BNPL firms to present customers with clear, easy-to-understand contracts that inform people of the financial risks associated with the loan product.
Founded in 2005, Klarna says it now has over 150 million active users globally. It partners with more than 500,000 retailers, including Nike, H&M and Ikea.
Once Europe’s most valuable private tech company, Klarna saw its valuation slashed from $45.6bn to $6.7bn last year amid a wave of downrounds.
The consumer credit company is now reportedly eyeing an initial public offering that could see it valued at $15bn.
Earlier this month Klarna rolled out ad management tools for retailers to reach the fintech company’s customer base on its platform.
Klarna competes with London-based Zilch in the high-growth BNPL market.