One of Buy Now, Pay Later’s (BNPL) leading firms, Klarna, has insisted the sector should be fully regulated in light of the UK HM Treasury shelving plans at this moment.
Klarna released a blog post today (18 July) stating that they have been proponents of regulating the BNPL space since initial talks began with the UK’s Financial Conduct Authority (FCA) back in February 2021.
However, Sky News reported last weekend that the Treasury is putting pause on any plans of regulation in an attempt to halt the widespread availability of BNPL products and services, fearing it may lead to a large increase in irresponsible credit spending.
With many BNPL players boasting seismic valuations due to a surge in usage, with Klarna currently valued at £6.7bn, there is also a fear amongst policymakers that stringent regulatory measures may see some of its largest players leave the UK market.
Undeterred by this, Klarna is welcoming regulation for its UK operation as the “arguments in favour are too strong” and “hope it happens quickly”.
Klarna stated: “It is, of course, important that regulation is introduced wisely. There are many examples of poor regulation akin to a tick box exercise which leave consumers unprotected and established banks entrenched.
“Take for example the regulations which require websites to display cookie disclaimers. A recent academic paper found that disclaimers had no effect on consumer’s attitudes to privacy; in fact, consumers “got even more accustomed to the use of cookies”.
“Regulation was introduced, website owners ticked the box, lawyers and compliance consultants got rich, but the effect on consumers was the precise opposite of that intended.
“If BNPL regulation is delayed in an effort to avoid this failure loop and instead make it more effective, then that is a good thing.”
During a time of global economic strain, with BNPL firms such as Klarna feeling the brunt of it, consumer protection over the products has heightened as the UK feels the effects of a cost-of-living crisis since last year.
In response to this, Klarna introduced measures such as penalty charges for late payments and a credit opt-out feature to better safeguard consumers on products they cannot afford.
Although the FCA has provided further clarity and guidance on how BNPL firms should operate in the country, it remains unclear whether a regulatory framework for the sector will be enacted anytime soon.
