BNPL big hitter Klarna takes aim at 'archaic' credit card companies

Buy now, pay later giant, Klarna, has launched a tongue in cheek OOH UK campaign entitled Old Credit Is History.

Working alongside a historian, the FinTech identified that money is now in its fourth revolution with digital currencies, neobanks and biometric payment systems opening a new chapter, driven by consumer demand and expectations.

The aforementioned campaign highlights parts of the financial world that, according to Klarna, are stuck in the past, where legacy businesses charge consumers “extortionate fees and interest charges”. 

The press release states: “Old Credit Is History seeks to bring to light the archaic business models that traditional credit card companies operate on.”

“These models see big banks cashing in on high interest rates, in 2020 alone, Brits paid £5.7 billion in credit card interest and fees. That same year, BNPL products saved people £76 million in interest payments.”

Klarna Cave

To promote the campaign, Klarna will open the doors to a Klarna Cave, creating a three-day immersive experience visualising the evolution of money.

Situated in Soho’s Greek Street and running from 23rd to 25th September, people will be able to enter a three-storey museum, where they can follow mankind’s financial journey through the ages.

Guest speakers include financial expert Kia Commodore and Sunday Times author and psychotherapist, Owen O’Kane.

At the event, visitors can also journey back in time with food from a paleo diet and transform their looks with free of charge beard trims and blow drys. 

Alex Marsh, Head of Klarna UK, says: “We’ve always been vocal in our belief that traditional credit models are stuck in the past and don’t benefit consumers.”

“It’s time antiquated financial businesses listened to what consumers want and offered better ways to pay that provide flexibility, choice and control, without any hidden fees.”

He adds: “It’s been so insightful working on the campaign to understand the journey money has taken over thousands of years and what could be coming up next.”

“We believe that old credit solutions should become a thing of the past and Old Credit Is History is a fun, tongue in cheek way to bring that important message to life.”

Citizens Advice research

One in ten shoppers who use buy now pay later have been chased by debt collectors, Citizens Advice recently claimed.

According to its research, these people were charged £39 million in late fees in the past year.

Of those who were referred to a debt collector for missed payments, 96% experienced a negative consequence.

They reported at least one of the following: sleepless nights; ignoring texts, emails and letters in case they were about debts; avoiding answering the door; borrowing money to repay the debt; or their mental health getting worse. 

Yet the charity found that not one of the BNPL checkouts on leading retailers’ websites warned people they could be referred to debt collectors for missed payments. Instead this was only flagged in the T&Cs on a separate page, if at all.

Citizens Advice conducted mystery shopping at 100 leading retailers and found 38 offered BNPL, with 22 offering more than two options, meaning there were a total of 74 BNPL checkouts. 

Out of those offering BNPL, only 11% warned shoppers they were taking out a credit agreement, the remaining 89% put this information in the small print or T&Cs. 

Citizens Advice asked the BNPL firms featured in the research if they ever referred customers to debt collectors.

Klarna, Clearpay, Laybuy and Openpay confirmed they do this as a last resort. Splitit said it doesn’t. PayPal refused to comment. 

Citizens Advice says it is s calling on the Treasury to urgently regulate this space as it “fears shoppers have been left unprotected and ill-informed during the rapid expansion of the sector”.

In response, Alex Marsh told RTIH: ‘‘Unlike credit card providers who intentionally keep people in debt with minimum payments and high fees and interest, our credit products are interest and fee free and are designed to keep people out of debt with clear upfront payment plans.”

“At Klarna we only ever use debt collection agencies to help us contact customers we are unable to reach and we do this on fewer than 1% of orders.”

“The debt collection agencies we work with are all FCA authorised and will only contact customers by telephone or email and do not use bailiffs.”

“We encourage any of our customers whose circumstances have changed, to please get in touch so we can help you with a plan to get back on track.”

PaymentsStaff WriterKlarna, Buy now pay later, FinTech, Credit cards, Payments, Citizens AdviceComment