Klarna, the world’s largest provider of buy now, pay later (BNPL) services, has urged the UK government to move faster in implementing regulations designed to protect consumers from “irresponsible” providers.
The government published its proposal to tighten BNPL regulations on Monday following a lengthy consultation process.
Under the proposed crackdown, BNPL firms will be forced to conduct credit checks and register with the Financial Conduct Authority before they can operate in the UK.
Swedish BNPL giant Klarna’s UK head welcomed the government’s proposals, adding that “it will raise standards and consumer protections across the sector”.
However, the fintech unicorn appears dissatisfied with the pace at which the government is rolling out this regulation.
“We urge the government to move quicker than planned to implement regulation which gives additional protections to consumers from both irresponsible, unregulated BNPL providers and traditional banks disguising high-interest products as BNPL,” Alex Marsh, head of Klarna UK told UKTN.
The BNPL sector soared in popularity during the pandemic and is expected to be worth $166bn by 2023, according to research by analytics and consulting firm GlobalData.
However, the sector has been largely unregulated, prompting concerns that the lack of oversight was sending consumers into debt.
Klarna enacted several consumer protection policies ahead of regulatory changes, most notably, the reporting of BNPL purchases to credit agencies.
“We make it clear in our marketing that BNPL is credit, we check consumers’ ability to repay on each transaction, and we now share data with the UK credit reference agencies to increase the visibility of BNPL use across lenders,” Marsh added.
More regulation, less red tape?
Despite Klarna’s public backing of the government’s regulatory proposals, it marks a shift from its CEO and co-founder’s previous criticism of red tape and other regulations.
Klarna chief Sebastian Siemiatkowski has described the EU-introduced rules know-your-customer (KYC) and anti-money-laundering (AML) as “the worst regulation ever created”.
Siemiatkowski has also said that cutting red tape will be a key factor in whether Klarna chooses London for a blockbuster public listing.
The Stockholm-based firm became Europe’s most valuable private company last year after a funding round left it with a valuation of $45.6bn (£37.1bn).
However, the company has seen its fortunes change amid the global economic downturn, announcing in May it intends to cut 10% of its workforce.
The company is also expected to lose its position as the most valuable European private firm after it was reported that Klarna would be seeking a lower valuation for its next funding round.