Klarna and Block (formerly known as Afterpay) are two of the biggest names in the buy now pay later (BNPL) industry. Both have gained massive popularity in recent years due to their ability to offer customers an easy and flexible payment option, allowing them to purchase items without having to pay upfront.
But in recent times, these companies have been facing some headwinds from regulators, especially in the United Kingdom, which could potentially hinder their ability to provide great service to their customers. In this article, we will explore how Klarna and Block revolutionized the buy now pay later industry, the regulatory challenges they are facing in the UK, and how these challenges could impact their future operations.
Klarna is a Swedish fintech company that was founded in 2005. It is one of the pioneers of the BNPL industry and has quickly become one of the biggest players in the market. Klarna's payment system is simple and easy to use. Customers can select Klarna as a payment option at the checkout and can then choose to pay for their purchase over time. Customers can either pay in installments or defer their payment for up to 30 days. This allows customers to purchase items that they might not be able to afford upfront and spread the cost over time.
Block (formerly known as Afterpay) is an Australian-based company that was founded in 2015. Block operates on a similar payment model as Klarna and has quickly gained popularity among customers in Australia, New Zealand, and the US. Both Klarna and Block have revolutionized the BNPL industry by providing an alternative payment option that is more accessible and convenient for customers. The ability to spread payments over time has allowed many customers to purchase items that they might not have been able to afford upfront. This has made it easier for customers to manage their finances and has also provided a boost to businesses, as they are able to increase their sales by offering BNPL options.
However, the rapid growth of the BNPL industry has raised concerns among regulators, especially in the UK. Recently, the UK's Financial Conduct Authority (FCA) announced that it would be introducing new rules for the BNPL industry. The new rules will extend the time it takes consumers to complete their transaction to up to five minutes versus the thirty seconds it takes using a credit card.
While these new rules are designed to protect customers, they could potentially hinder the growth of the BNPL industry. Klarna and Block are both commenting on the implications of these regulatory challenges and seek to influence towards a more streamlined regulatory framework so they can provide great service to their customers. While these challenges are designed to protect customers, they could also impact the growth of the industry and the businesses that rely on BNPL options to drive sales. It remains to be seen how Klarna and Block will navigate these challenges and how the BNPL industry will evolve in the future.