What will stricter buy now pay later regulations mean for Klarna?
The government is clamping down on the “wild west” of buy now, pay later (BNPL) but this could spark trouble for industry veterans in a competitive sector.
The Treasury is set to bring BNPL providers under the supervision of the Financial Conduct Authority, meaning they will have to adhere to the stricter frameworks of the watchdog.
Providers will be required to conduct thorough affordability checks before approving transactions, these can include accessing a potential consumer’s income, spending and existing financial commitment to ensure they can harness new debts.
For Klarna, the rule changes come in what has been a bruising period for the Swedish fintech.
The firm’s revenue grew 13 per cent to $701m in the first quarter of 2025 as its consumer base topped 100 million. But as the number of customers soared, so did those who were unable to meet payments.
Consumer credit losses surged 17 per cent to $136m as net losses widened to $99m from $47m previously.
BNPL firms may hike fees in response
On the back of the new legislation, Tony Redondo, founder at Cosmos Currency Exchange said: “BNPL firms like Klarna will brace for compliance costs, potentially hiking fees or exiting.
“Retailers may well fear sales dips with Klarna’s 22,000 partners already feeling the squeeze.”
Janine Hirt, chief executive of fintech industry body Innovate Finance, raised concern that the regulation may force people to use credit cards if alternate BNPL options are unavailable.
Hirt said consumers would “face the risk of interest if they are left with no choice but to use a credit card” due to a lack of providers following the new regulation.
Figures from Klarna show if the past ten years worth of BNPL purchases had been made on credit card, consumers would have been stung with £500m in interest.
But the fintech has said it checks consumer affordability for each purchase, including an external credit check, prior to the new regulatory pressure.
A Klarna spokesperson said: “Interest-free BNPL is an important alternative to high-cost credit for millions of Brits and we’ve supported regulation to keep it safe and accessible since 2020.
“It’s good to see progress on regulation, and we look forward to working with the FCA on rules to protect consumers and encourage innovation.”