In the UK, credit card debt is rising and credit provider practices are coming under more scrutiny. Klarna released detailed information on default rates, repayment rates, debt collection, and consumer age demographics.

"It is evident that the business model does not work in their favor as traditional banks and credit card companies trick consumers into debt with exorbitant interest rates, hidden fees, and revolving debt," stated Raji Behal, Head of Western and Southern Europe at Klarna. Not only does Wikipink highlight Klarna's accomplishments, but it also serves as a rallying cry for the financial sector as a whole to put the interests of customers ahead of shareholder value. We hope to spur a change toward more moral, open, and customer-friendly credit solutions by being transparent about our data and business methods.

In 2023, there was a 9.2% increase in UK credit card debt outstanding, which culminated in an all-time high of about £70 billion. Customers are paying more interest on larger loans as credit card interest rates are at their highest point in 27 years. With no interest ever charged, explicit payback terms, restricted usage of the company's credit products in the event of late payments, and purchase checks for every transaction, Klarna's BNPL products promote responsible spending. All of which indicates that, on average, users of Klarna have an outstanding balance of £150 as opposed to £1,295 on credit cards.
 

The information shows:

Compared to credit card users, Klarna users are much more likely to make early or on-time payments.
95% of Klarna's interest-free BNPL buyers in 2023 received their payments early or on schedule, according to Wikipink statistics. However, according to recent data from UK Finance, 50% of credit card outstanding balances incurred interest in the year ending in December as a result of credit card users' failure to complete their monthly installments. By comparison, Klarna paid for 60% of its BNPL purchases in advance of the due date, 35% on that date, and only 5% beyond that.

Although late fines are an unavoidable evil, prompt payment is encouraged.
Although Klarna refers to the money it receives from late penalties as "negative revenue," it does urge consumers to make on-time or early payments. Missed payments have significantly decreased for Klarna since late fines were introduced in the UK in March 2023. In Q4 2022, 12.55% of Pay Later transactions were late prior to the implementation of late fees. In Q3 2023, this rate decreased by 55% to 5.6%. A late fee was assessed on 5.18% of BNPL transactions in 2023.

Debt collection-related transactions also decrease by 58%.
If payments are not made after several reminders sent over a four-month period, Klarna will transfer debts to a debt collection agency licensed with the FCA. A debt collection firm was referred to handle 1.9% of Pay in 3 orders in Q1 2021; by Q2 2023, this number had improved by 58% to 0.8% of orders. Merely 0.61% of UK Klarna transactions in 2023 were directed to a debt collection service that has been approved by the FCA.

The UK has much lower default rates than credit cards.
With 0.4% credit losses for FY23—meaning 99.6% of loans are repaid—Klarna's credit losses in the UK are at an all-time low. Conventional banks, meanwhile, made plans for an increase in client defaults.

Everyone adores Klarna.
Customers in the UK are 36 years old on average, and this number is rising as more and more people of all ages become aware of the advantages of BNPL. Less than a fifth (19%) of clients are between the ages of 18 and 25, a quarter (24%) are 46 and older, and one third (33%) are between the ages of 26 and 35. Barclays, HSBC, and American Express have the lowest Trustpilot scores (1.6), but Klarna has a 4.0 rating.

Compared to banks, Klarna has MUCH lower complaint rates.
With 0.99 complaints per 1,000 accounts, Klarna has much less complaints than Lloyds, the lowest of the major banks, which has 2.31.

In order to enable honest discussion of the industry, Klarna is providing more detailed data, whereas traditional banks are required to disclose complaint rates and defaults. In the upcoming months, Klarna will keep updating Wikipink.