Klarna partners with Experian, TransUnion on BNPL credit reporting

Klarna, one of several BNPL fintechs serving UK consumers, will now report BNPL lending to Experian and Transunion.

by | May 4, 2022 | bobsguide

Swedish buy-now-pay-later (BNPL) fintech Klarna will begin reporting UK customer obligations and repayments to credit reporting agencies in the country as of June 1, the company has announced.

The move is a result of two years of negotiations with credit rating agencies Experian and TransUnion and is expected to begin affecting users’ credit ratings as of 2023.

“It is alarming that UK consumers are still being forced to take out high cost credit cards to demonstrate they can use credit responsibly and build their credit profile,” said Alex Marsh, head of Klarna UK.

“That will start to change on 1 June this year as the vast majority of the 16 million UK consumers who make Klarna BNPL payments in full and on time will be able to demonstrate their responsible use of credit to other lenders.”

Klarna will report UK consumer purchases paid on time, late payments and unpaid purchases for Pay in 30 and Pay in 3 orders made on or after June 1. The company already reports payments made through its Klarna Financing, its longer-term lending option for big-ticket items.

BNPL under the microscope

The development follows increased public scrutiny on buy-now-pay-later credit providers, which have come under fire from MPs in recent years for incentivising consumers to take on more debt than they can afford.

A similar stance is also shared by the FCA. A report commissioned by the regulator in 2021 found that the lack of reporting could make it challenging for lenders to assess whether consumers can afford their products.

The problem is additionally complicated by the rapidly growing number of buy-now-pay-later (BNPL)

In the wake of the FCA report, a number of lenders, including some BNPL fintech firms, have launched similar initiatives.

In April, London-based Zilch announced a partnership with Experian, adding reciprocal reporting of payment plans to the credit rating agency’s data set.

In January, challenger bank Monzo launched its own BNPL product, Monzo Flex, which is regulated in the UK and for which the company already shares data with CRAs.

Most interest-free BNPL schemes, such as Klarna, Laybuy and Clearpay, are currently unregulated so the firms are not obligated to report information about borrowing to credit rating agencies.

Monzo and Zilch are two exceptions, both being regulated in the UK.

In February, CRA TransUnion announced that it had partnered with a number of “leading” BNPL providers to begin including this data in credit scoring.

Founded in 2005 in Stockholm, Klarna is now one of the highest valued private fintechs globally and provides payment solutions for 147 million active consumers across 400,000+ merchants in 45 countries.