Klarna will begin reporting the use of buy now/pay later products to U.K. credit reference agencies, which could see the increasingly popular mode of financing influence users' credit ratings.
The reporting will be effective on all new purchases made in the U.K. using services including Klarna Pay in 3 and Klarna’s payment card from June onward, the fintech said in an emailed statement Wednesday. Klarna will report payment performance to Experian and TransUnion, and the information will appear on a U.K. consumer’s credit report.
The move comes amid increased scrutiny from U.K. regulators, who are concerned about money laundering and the cost of credit. The U.K.’s Financial Conduct Authority said in 2021 it will start regulating the interest-free buy now/pay later sector as their use soars.
Fintech firms such as Klarna and Afterpay have grown into multibillion-dollar companies by offering online shoppers the option to pay in installments. BNPL specialists have already diverted as much as $10 billion in annual revenue from banks, according to research in July by McKinsey, and traditional financial giants including Goldman Sachs and Mastercard are trying to muscle in on the market.
