‘Buy now pay later’ firms such as Klarna are set to come under government fire following the results of a report to be published on Tuesday by the former Financial Conduct Authority (FCA) interim chief executive Chris Woolard.
Sky News reported that the sector will be coming under higher scrutiny after concerns that the company is encouraging customers to buy products that they cannot afford.
Woolard was commissioned by the FCA board to carry out a review on firms such as Klarna and Clearpay. Klarna now has 1m monthly active users and has been valued at $11bn (£8.5bn). It has been hugely successful among young customers shopping online.
A spokesman for Klarna said that it was “very comfortable operating in a regulated environment and wholeheartedly supports further regulation of the buy now pay later sector in the UK”.
“We agree that regulation has not kept pace with new products and changes in consumer behaviour and it is now essential that regulation is modern and fit for purpose, reflecting both the digital nature of transactions and evolving consumer preferences.”
To use Klarna, shoppers only have to provide a name, email, date of birth, mobile number and billing address to have their payment deferred up to 30 days.
“Since launching the campaign, these cases of fraud have been worryingly common. This is largely thanks to just how easy it is to use these products and the little information required to access them. It’s a honeypot for fraudsters and it simply shouldn’t be this easy.”