Klarna’s UK boss has hit out at Barclays today for publishing what he called “mind-boggling” and “irresponsible” research exploring mounting buy-now pay-later debt levels in the UK.
Barclays Partner Finance – a division of the bank which offers its own regulated buy-now pay-later-style financing product – issued research today alongside debt charity StepChange warning that 876,000 Brits could be plunged into unmanageable debt this year as a result of BNPL products.
The two organisations called on retailers to intervene and learn more about the products they are offering to customers as a payments method.
But Klarna UK boss Alex Marsh has slammed the research from Barclays as an attempt to push its own “high-cost” instalment product.
“It is mind-boggling and frankly irresponsible in a cost of living crisis, that Barclays should use StepChange to endorse their high-cost instalment credit product which charges 10.9 per cent interest and to lobby against interest-free and manageable Buy Now Pay Later products, which HM Treasury just this week concluded are ‘inherently lower risk than interest-bearing credit products’,” Marsh said in a statement.
“The conclusions in this report from Barclays are hugely patronising to UK retailers who already choose their credit providers based on responsible lending practices and quality of service.”
Marsh added that it was “unsurprising that UK Retailers, like their customers, are ditching the old banks.”
The comments mark a ramping up of the rhetoric between BNPL firms and traditional credit providers, with Klarna consistently claiming that credit cards pose a bigger threat to consumers than BNPL products.
Boss of New Zealand BNPL firm Laybuy told City A.M. today the fact that banks had moved in on the space themselves underscored the safety of the products.
“Only a few years ago many banks were criticising BNPL providers but perhaps the biggest endorsement of the industry is that the very same banks are now offering their own BNPL products,” he said. “Customers no longer have to turn to expensive credit or store cards where the APRs are in the double digits. BNPL is very much here to stay.”
Concerns have grown over the unregulated nature of BNPL products offered by fintech firms like Klarna amidst the cost of living crunch however, as shoppers turn to the products to spread the cost of essential purchases.
Research from retail investment platform Hargreaves Lansdown in March found that nine per cent of people had used the products for essentials as prices surged.
The Treasury on Monday published plans to regulate the sector including bringing BNPL firms under the remit of the Financial Ombudsman Service and requiring firms to carry out affordability checks, but regulation is not expected to be finalised until late 2023.
The speed of movement on regulating the sector has come under fire from campaigners as the cost of living soars, with Money Saving Expert founder Martin Lewis saying protection were “desperately needed” ahead of a looming “financially bleak winter”.
Barclays has been contacted for comment.