It’s been a busy January for Alex Marsh, UK boss of buy-now-pay-later (BNPL) giant Klarna.
With a regulatory clampdown looming later this year, Marsh laid out Klarna’s case for regulation in a Treasury consultation at the start of the month, and just last week, the Swedish-headquartered firm made its first foray into offline payments in the UK with the Klarna Card.
Klarna Card, Marsh argues, is an important step in broadening consumer choice in the world of retail payments in the UK.
“The feedback from consumers has been that consumers are choosing to use BNPL as an alternative to credit cards when they’re shopping online,” says Marsh.
“And as lockdowns are coming to an end and people are returning to the high street, people want these credit options as they are shopping in store.”
The 10 million users across the UK that have made BNPL a £6.4bn a year market will now have the opportunity to extend this into the real world via Klarna’s new card.
But not everyone welcomes this expansion of the BNPL universe in the same way as Marsh.
Klarna Card, while looking and feeling much like a credit card, does not enjoy the same regulatory protections as one. Crucially it sits outside Section 75 regulation which allows buyers to make a claim against a retailer, and it is not covered by the Financial Ombudsman Service, which mediates disputes.
The launch of the card also comes a year on from the Woolard Review in which former FCA boss Chris Woolard warned of the need for urgent regulation of BNPL.
Marsh insists that regulation would be welcomed.
“I think it’s important that regulation comes to bring common higher standards across the whole sector and ensures that consumers have the same safeguards they have if they use a credit card.
He insists that the firm has not been waiting for regulation to come, however, and says that Klarna has reviewed its terms and conditions to make sure it is clear the product is credit and has created a complaints adjudicator to support on referral complaints.
Marsh says he even approached the Financial Ombudsman in January last year for voluntary regulation.
But Klarna’s actions have far from satisfied critics of the wider BNPL space.
Kalgera, a financial safeguarding company, warned that BNPL was playing into the looming cost of living crisis last week; debt charity Step Change warned recently that BNPL needs regulating to prevent people with financial difficulties from struggling further; and consumer group Which? warned at the start of the year that shoppers still did not realise they were taking on a form of debt when they were using the products.
For Marsh, the status of BNPL products as unregulated has amplified concerns around debt compared to traditional credit card products.
“Unfortunately the reason why people are shifted toward the products and the benefits has been muddled with the current regulatory status,” Marsh says.
“If you fast forward five years time, all things being equal, with the regulation firmly in place, I think these will be seen as fairer, more stable form of credit than credit cards.”
But a year on from Woolard’s warning that urgent regulation was needed of the sector, Marsh can only predict.
And until some regulatory clarity is provided later this year, the debate is likely to rage on as fiercely as it has been.