Buy now, pay later firm Klarna today introduced the choice of paying for items in full items ahead of rule changes set to be announced by the Treasury.
Klarna said the “pay now” option and other changes it was making would give customers more clarity and control.
Klarna said it wanted to “drive up standards” in the sector by improving the way it operates and communicates.
Myron Jobson, Personal Finance Campaigner, interactive investor, says: “Klarna’s new ‘Pay Now’ feature is a positive first step forward for the Buy Now Pay Later (BNPL) industry which is ripe for further regulation. BNPL services have become like a drug for many consumers, particularly young adults, used to buy coveted clothing and must-have gadgets owned by their idols without having the cash in the bank to fund these purchases in full.
“The introduction of Klarna’s ‘Pay Now’ feature comes just over a month after Citizens Advice published research which found that one in 10 BNPL shoppers have been chased by debt collectors, rising to one in eight young people.
“The very existence of this form of lending flies in the face of the age old yet still important and relevant financial lesson of spending within your means – a lesson worth remembering amid the rising cost of living, compounded by bumper energy bills.
“The BNPL market is now too big to overlook, with the use of such products having nearly quadrupled in 2020 to reach £2.7 billion, according to the City watchdog. Regulation can’t come soon enough.
“The explosion of this form of lending in recent history underlines the importance of financial education from a young age. While it might be tempting to delay payment – and BNPL adverts can be very enticing and sometimes misleading – it can be a slippery slope into debt.
“While debt is not inherently bad, knowledge on how to get a handle on it is crucial. BNPL firms should make it crystal clear to customers that they could be referred to debt collectors and their credit scores could be tarnished if they miss payments.”