Klarna has reported a year-over-year drop in delinquency rates across both its core buy now, pay later (BNPL) offering and longer-term Fair Financing product.
The fintech giant revealed on July 31 that just 0.88% of its global BNPL transactions became delinquent in Q2 2025, down from 1.03% in the same quarter last year. The Fair Financing product, typically used for larger-ticket purchases over 6-12 months, experienced a smaller decline from 2.20% to 2.18% year-over-year.
While these figures show only marginal improvements in loan repayments, they represent a record number of transactions repaid on time or early in the company’s history.
“More customers are paying us back on time or even early, with delinquency rates continuing to decline: proof that our model is working exactly as intended,” said Sebastian Siemiatkowski, Klarna CEO and Co-Founder.
“When you build credit products that are fair, transparent, and designed with the consumer in mind, people make responsible choices.”
A chance to shake off debt concerns
The data comes as regulators around the world prepare to clamp down on the BNPL sector.
Although flexible payment services have surged in popularity, concerns about consumer protection, transparency, and rising debt have driven calls for stricter oversight.
The US was among the first to propose new rules, initially placing BNPL providers in the same category as credit card issuers. Klarna and other firms pushed back, arguing the comparison was flawed.
The Swedish-based fintech likened it to “comparing apples to oranges.” US regulators later reversed course and are now working on a more tailored regulatory approach.
Australia has followed a similar path. The government teased in 2024 that BNPL services would be regulated under existing credit laws overseen by the Australian Securities and Investments Commission (ASIC).
In June, ASIC began enforcing a new regulatory regime for BNPL and low-cost credit products.
Australia’s Assistant Treasurer and Minister for Financial Services, Stephen Jones, explained: “We want Australians to enjoy the benefits of BNPL, while knowing there are strong consumer protections in place. If it looks and acts like credit, then it should be regulated as such.”
The UK has also introduced new rules, set to come into force in 2026, which aim to prevent shoppers from falling into debt traps.
While these international regulations are focused on strengthening consumer protection, BNPL providers have warned against going too far.
Industry body Innovate Finance echoed this concern. CEO Janine Hirt cautioned that bringing sole trader BNPL financing within the scope of regulation could result in product withdrawals. She also raised concerns about requiring domestic licences for traders to offer BNPL.
“Under the Treasury’s rules, a plumber who goes to a family’s home to fix a burst pipe will need an FCA licence to provide BNPL as a payment option. Many of these traders are unlikely to go through this complex licensing process,” Hirt said.
“It cannot be right that the family is unable to spread the cost through BNPL and instead faces interest charges if they turn to a credit card.”
Despite debt being the main driver of regulatory reform, Klarna has consistently defended its model. In response to scrutiny in the Netherlands earlier this year, the company highlighted 99.4% of Klarna loans are repaid in full.
Looking ahead, Klarna appears focused on proving to regulators that its products are both safe and fundamentally different from traditional credit. With improving repayment performance and a growing user base, the company is positioning itself as a responsible innovator in a space facing increasing scrutiny.
