Tensions between the traditional banking sector and the increasingly popular buy now, pay later industry spilled over this week as Klarna hit back at Barclays’ research on BNPL regulation, calling it “mind-boggling” and irresponsible”.
The bank highlighted the role of retailers in the BNPL ecosystem, arguing that they do not fully understand the credit options they’re presenting to customers and the “pitfalls of unregulated lending”.
Alex Marsh, the head of Klarna’s UK business, hit back, issuing a statement saying: “It is mind-boggling and frankly irresponsible in a cost of living crisis, that Barclays should use StepChange to endorse their high-cost installment credit product which charges 10.9% interest and to lobby against interest-free and manageable Buy Now Pay Later products.”
Marsh adds that Barclays’ conclusions are “hugely patronising to UK retailers,” and it is “unsurprising that UK retailers, like their customers, are ditching the old banks”.
Earlier this week, the UK government outlined long-awaited plans to make BNPL providers carry out affordability checks and refrain from misleading advertising and promotions.
The government will publish a consultation on draft legislation toward the end of this year, with the aim of laying secondary legislation by mid-2023, after which the FCA will consult on its rules for the sector.
The long timeline has led to criticism by consumer champions who fear that millions of people in the UK have been saddled with unaffordable debt by taking advantage of easy-to-access BNPL lending with little understanding of the repercussions around failed repayments and credit scoring.
