KLARNA is launching a “pay now” option for shoppers so they can cover the cost of an item in full and upfront.
It means users won’t be stuck with the bill later on and comes after the financial watchdog said it would clamp down on buy now, pay later (BNPL).
Klarna and other providers like Clearpay and Laybuy have been criticised for leading people into debt too easily.
Putting off payment means that shoppers can quickly rack up debts from several smaller purchases that becomes unmanageable.
Now Klarna is ditching the pay later part for those who want to pay straight away.
Buy now, pay later will still be available with the option to pay within 30 days or in three instalments.
For Klarna’s financing option where users spread the cost over six to 36 months, there will no longer be a £12 late fee payment.
But if shoppers don’t pay on time this can still affect their credit score.
There are already no late payment fees for shorter borrowing times.
It’s part of a wave of changes the company says will ensure “consumers are fully in control of their payments whether they pay now or pay later”.
Klarna says it has now made it clearer at online checkouts which have Klarna as a payment option that BNPL is a form of credit.
It has also worked with consumer group Fairer Finance to make its terms and conditions simpler.
The payments company has around 90 million users worldwide and is used by 250,00 shops including high street and online-only stores like Shein, Asos, Debenhams and Pretty Little Thing.
Klarna boss Sebastian Siemiatkowski said: “We firmly believe that most of the time, people should pay with the money they have, but there are certain times where credit makes sense.
“In those cases, our BNPL products offer a sustainable and no cost healthy form of credit – and a much needed alternative to high cost credit cards.”
Klarna says it will also strengthen its credit and affordability checks, something the regulator has called for.
Currently shoppers who pay within 30 days or in three instalments have a “soft” credit search.
This checks eligibility but does not impact credit scores and is not visible on shoppers credit history.
Klarna’s financing products where you pay off the debt over a longer period of time can impact your credit score.
The firm is working with credit reference agencies so that BNPL transactions appear on credit reports, however this is still understood to be months away.
When it does come in, it will mean that all BNPL borrowing will be seen for the first time on people’s credit reports and can be viewed by all lenders.
BNPL will also help build consumers’ credit scores for the first time, provided they paid on time.
The company is currently trialling open banking, so that shoppers can securely share income and spending data from their bank accounts.
This information can then be used to confirm they can afford future repayments.
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