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Klarna is taking steps to distinguish itself from traditional banks and credit card companies. The buy now, pay later (BNPL) provider this week launched an initiative called Wikipink, aimed at “setting new standards for transparency and responsibility” in the lending industry.
In effect, this means revealing internal data such as late fee rates, repayment rates, and customer age demographics, and contrasting it with major banks and credit providers.
“We still see too many of the traditional banks and credit card companies pushing products on consumers with exorbitant interest rates, hidden fees, and revolving debt,” David Sykes, chief commercial officer at Klarna, said in a statement. “It is very clear that the traditional credit card model does not work in the favor of the vast majority of customers.”
To highlight this disparity, the fintech firm commissioned a Harris Poll revealing that 41% of US credit card users carry revolving month to month balances, and 23% said they’ve “paid their credit card late and incurred a late fee or had a credit card payment go into debt collection over the last year.”
Klarna contrasted these numbers to its own data from the Wikipink initiative, which showed that in 2023, 31% of Klarna Pay users paid early, 65% paid on time, and just 4% were charged late fees, while fewer than 1% have ever defaulted.
The initiative comes roughly a year after Klarna introduced late fees, which has led to a significant drop in the number of UK customers it referred to debt collectors.
Klarna also emphasized that it proactively encourages customers to pay on time, sending them personalized notifications and follow-up reminders.
Buy now, pay later has gotten its own share of criticism in recent years. The Consumer Financial Protection Bureau released a report in 2022 expressing concerns that the lending model would encourage consumers to overextend themselves financially.
A more recent report from the Federal Reserve Bank of New York found that “financially fragile users are almost three times as likely as financially stable users to use BNPL five or more times.”