Buy now pay later (BNPL) FinTech Klarna is modifying its services in the U.K. ahead of new regulations expected to be handed down by financial watchdogs in the country, according to a press release.
Some of the changes have to do with how certain aspects of the service are worded. Klarna will now clearly spell out that BNPL is a credit offering that has penalties for missed payments. At checkout, aside from being offered payments spread over weeks or months, customers can choose a new Pay Now feature.
Klarna also indicated that it would take a stricter stand with credit checks and enable people to share wage and income data from their bank accounts to prove they can make the repayments. The company’s open banking services are connected to over 6,000 banks across 20 countries.
See also: Klarna Opens New UK Headquarters
Other changes include simplified terms and conditions, better handling of complaints, and the abolishment of late fees. The changes align Klarna’s U.K. BNPL services with those offered in the other 17 countries it serves.
“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,” said Sebastian Siemiatkowski, Klarna’s co-founder and CEO.
He added that the changes put consumers “fully in control” of how they choose to pay, whether it’s in full at the time of purchase or spread out over time.
Read more: Klarna and Simon Property Group Team on National BNPL Initiative
The changes come as critics point to the BNPL industry as one that could encourage younger consumers to take on more debt than they can afford, according to a report in Financial Times. The U.K. Advertising Standards Authority last year prohibited several of Klarna’s advertisements for insinuating that using credit can boost people’s moods.
A Financial Conduct Authority (FCA) report in February indicated that the BNPL industry needs oversight and should be subject to the agency’s regulations. The FCA called the issue one of “urgency” due to the “significant potential for consumer harm.”
According to the FCA, the BNPL sector quadrupled to £2.7 billion, which is roughly 1 percent of the U.K.’s credit sector, FT reported. Some 75 percent of the country’s 5 million active BNPL users are 18 to 36 years old and use the service for clothing and shoes. About 10 percent of customers with a major bank who used BNPL services exceeded their overdraft limits.
Klarna was valued at $46 billion following its last funding round and has its eye on a public offering that could be in London.
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