Klarna gets UK boost with FCA credit and payments approval

Red flag stuck in a map of the UK signifying London.
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Klarna has received approval form the UK’s Financial Conduct Authority (FCA) for its regulated payments and credit services, having been active in the country under a temporary permit.

The Swedish fintech and payments provider is well known for its buy now, pay later (BNPL) offering, but also provides other financial services, such as regulated credit and payment products.

The services greenlit by the FCA are the Klarna Term Loan and Klarna Card, which are credit products, and the Klarna Card, One-time card, Instore Card and Open Banking-based payments system, classed as regulated payment services.

Abby Vickers, Head of Klarna Financial Services UK, said: “Klarna has always operated under the oversight of the FCA, delivering our regulated products to a very high standard of customer care. 

“As well as enabling us to continue to provide our regulated products, the FCA approval puts Klarna’s successful UK business on a secure regulatory footing ahead of the expected regulation of BNPL.”

Headed by Vickers, Klarna Financial Services UK was created by the fintech as a new UK-based entity to provide its consumer-facing financial services in the country.

Prior to this, the firm’s flagship Swedish licenced company, Klarna Bank AB, had been active in the UK under a FCA Temporary Permissions Regime (TPR), in place since the UK voted to leave in the EU in 2016.

However, with this licence due to expire on 31 December 2023, the company has undertaken measures to ensure its continued activity in the UK – however, as alluded to by Vickers, the firm’s BNPL products remain unregulated in the country.

The popularity of BNPL in Europe has intensified greatly over recent years, with Klarna citing a year-on-year increase of 14% in gross market value (GMV) for the service in Q2 2023.

BNPL has proven a huge growth driver for Klarna,- whether by its full BNPL offering or a more limited service as in the UK – in 45 countries, with over 150,000,000 active users across 500,000 merchants.

Although its short-term BNPL products fall outside of the scope of the UK’s Consumer Credit Act, the company is adamant that these services should be included to “protect consumers from bad actors, while continuing to have access to low cost credit”.