Comment: Klarna card is “a dangerous piece of plastic”

This morning, Klarna released its first physical payment card, as the Buy Now Pay Later trend continues to spiral out of control, Jens Bader, CEO of Berlin-based payments business, Funanga, previously CCO at Paysafe Group and Secure Trading, said: “The Klarna card could become a dangerous piece of plastic. Buy Now Pay Later creates unhealthy customer behaviour and drives people into financial distress. This is the business model and I’m deeply concerned that the BNPL trend is making its way into day-to-day physical payments, as well as online purchases. This card will appeal to impulse-driven customers, people who want to buy things that they cannot really afford and probably do not need. It enables them to do so easily and immediately, with a single payment.

“Many BNPL users do not realise the schemes are a form of credit or debt. This means they are opting into a product under a false pretence. It begs the question as to whether these consumers are being misled. Customers could be credit checked when opting for a BNPL service, this means credit rating agencies (such as Schufa in Germany) would frequently be checking on customer’s credit worthiness. Every check that influences the algorithm leaves a mark on the customer’s file. Most people are completely unaware and I believe many people would stay away from such services if they knew that they entered into a debt service.

“I think it is irresponsible with regards to financial education of teenagers and young adults, who are increasingly told they can buy things that they cannot really afford. I wouldn’t be surprised to see them disarmed in H2 – similar to how payday loan companies like Wonga became the subject of extreme scrutiny after initial success. The simple fact is that we cannot treat credit as a payment service. BNPL brands are lending products and should be regulated as lending products. I accept merchants extending credit to their customers based on hard facts, but not payment products doing so regardless of who a customer is and what they are buying. BNPL is a largely unregulated service. In reality, providers should fall under the same regulation as loan providing/lending businesses. Taking over someone’s immediate liability to pay an amount to a merchant is not really a “payment option”. It is, at that moment, a lending process. As such the corresponding rules and regulation should apply – but they do not.”