LONDON – Swedish fintech company Klarna is embedding its buy now, pay later service in a physical card in the UK.
The company on Wednesday announced the launch of Klarna Card, a Visa card that allows users to delay payments for their purchases, both in-store and online.
The card is already available in Sweden and Germany, where Klarna says over 800,000 people are now using it. This is the first time it has arrived in a country outside the European Union. The company is expanding aggressively in the UK and America.
The Klarna Card will initially only include Klarna's "Pay in 30" feature, which allows buyers to pay off their debts within 30 days. The company plans to add more payment options in the future.
Like other "buy now, pay later" companies, Klarna offers a popular product that spreads the cost of users' purchases over a period of monthly installments that are typically interest-free. The company makes money by charging retailers that offer its payment method a small fee with every transaction.
Its card, available in either black or pink, sends push notifications to a customer's smartphone when they make a transaction. Also, users can extend their payment due date by up to 10 days for free.
Klarna plans to phase out the card to open eligibility to all customers by early 2022. It has set up a waiting list for users to sign up for in the meantime.
"For online purchases where credit makes sense, buy now, pay later is the sustainable alternative with no interest and clear payment plans," said Alex Marsh, Head of UK at Klarna.
“The launch of Klarna Card in the UK brings these benefits to the offline world, giving consumers the control and transparency of BNPL for all their in-store purchases.”
Klarna has often criticized the credit card industry for burdening consumers with debt, often at high interest rates. The launch of its own physical card may come as a surprise to some, but the company argues that it's a better alternative to credit cards because it doesn't charge interest or late payment fees.
Nonetheless, the launch of the “buy now, pay later” industry is facing growing scrutiny from regulators. The UK is preparing new rules to bring the sector under the oversight of the Financial Conduct Authority, the country's financial services regulator.
Meanwhile, the U.S. Consumer Financial Protection Bureau launched an investigation into popular BNPL programs such as Klarna, Afterpay, Affirm and PayPal.
Klarna spokesman Daniel Greaves said that the UK FCA is "fully aware of the product and how it works" and that the company had the green light from regulators before launch.