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Klarna strengthens credit checks in the UK as regulators crack down on ‘buy now, pay later’


Swedish fintech firm Klarna on Monday said it is introducing a number of changes to its product in the U.K., as regulators in the country prepare to tighten regulation on the fast-growing “buy now, pay later” industry.

One of the biggest updates Klarna is implementing is stronger credit checks. The company said a new tool will let users share income and spending data from their bank accounts to determine whether they can afford future repayments. The feature is voluntary, a Klarna spokesperson said.

Unlike banks and credit card providers, Klarna doesn’t conduct hard credit checks on its customers, meaning their credit score shouldn’t show up on their credit history.

Klarna said it will also launch the ability for users to pay for things instantly in one go, as well as clearer language at checkout letting users know they are taking out a loan with the firm and may be penalized for missing a payment.

Klarna is one of the world’s largest buy now, pay later, or BNPL, operators. Such services let shoppers split their purchases into monthly installments, typically interest-free. In 2020, about $97 billion of global e-commerce transactions were processed through a BNPL platform.

Major companies have made a leap into the market, including PayPalSquare and Mastercard.