Klarna UK Will Charge Fees For Payments That Are Late
In order to reduce loan defaults, Klarna will start charging UK clients late payment costs.
The Swedish bank and payments company has been making a big push to cut costs and make more money over the past year. On March 16, customers who miss payments will have to pay a £5 fee, according to CityA.M. Fees won’t be more than 25% of the value of an order, and there won’t be more than two fees per order.
Alex Marsh, the UK boss of Klarna, wrote in City A.M. that the company was worried that its no-fee policy was making people spend more than they should on the platform.
“Not charging fees feels consumer-friendly, but we’re worried it drives the wrong behaviour,” he wrote. “Our data now shows that a total absence of late fees actually leads to less favorable outcomes for customers: with less reason to pay on time, customers are more likely to miss a payment.”
Klarna plans to offer automatic payments and a grace period of seven days before charging a fee.
In the Netherlands and Belgium, late fees have made Klarna payments 20% more likely to be made on time. And in a survey by YouGov, 75% of British customers said that a late fee would make them more likely to pay on time.
Marsh said that some of the money from the late fees will be used to pay off customers’ debts who are in deeper arrears. The company’s new “Customer Recovery Programme” will help people pay off their debts and give them “tools to stay on top of payments.”
In the UK, some of the biggest BNPL companies already charge late fees. For example, both Laybuy and Clearpay charge shoppers a £6 late fee.
The managing director of Fairer Finance, James Daley, says:
“We are pleased that Klarna has introduced late fees, as we have previously recommended to them. Used responsibly, late fees provide an important deterrent as well as a reminder that Buy Now Pay Later is a form of credit and needs to be taken seriously as a loan. It’s of course important that late fees are fair and reasonable, and don’t become an income stream for credit providers, and it’s encouraging to see that Klarna intends to provide additional support for those who fall behind.”
