Fintech giants Klarna and Block slam 'outdated' UK buy now, pay later regulation proposals
The U.K.'s plan to regulate the buy now, pay later industry is «outdated» and will lead to worse consumer outcomes, executives at two of the industry's giants said, vowing to fight tooth and nail to relax the proposed rules.
Bosses at Klarna and Block laid into the proposals at an event hosted by U.K. fintech industry body Innovate Finance last week, saying that the rules, while well-meaning, were likely to drive people toward more expensive credit options, such as credit cards and car financing plans.
In a consultation paper published in February, the U.K. government suggested applying parts of existing regulation – namely, the Consumer Credit Act – to buy now, pay later plans. The currently unregulated buy now, pay later model would be supervised by the Financial Conduct Authority.
The CCA calls for a much greater level of information disclosure in the fine print of lending agreements. BNPL firms say this requirement would lead to «disproportionate friction» for people seeking short-term forms of credit.
Buy now, pay later loans allow shoppers to defer payment by a month or to split the cost of their purchases over a period of equal monthly instalments. What makes them attractive is the ease with which someone can apply for a loan, and the fact that they are often interest-free – so long as you pay on time.
If someone currently uses buy now, pay later at an online checkout page, they can expect to complete the purchase in a minute and a half, versus 30 seconds for credit cards, Alex Marsh, Klarna's head of U.K., said on a panel at Innovate Finance Global Summit. Based on Klarna modelling, that could increase to five minutes under the new U.K. rules, Marsh said.
Another disagreement BNPL firms have is that the present
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