Klarna wants to prevent customers from getting excessively indebted

The Swedish financial services provider has been repeatedly criticized in the past for making it easier for young people to take out debt. With the new changes, the company wants to address this problem.

The Swedish payment provider Klarna has adapted its products to prevent consumers from getting excessively indebted. 

In total, the company announced five product changes in Germany “to improve the financial well-being of consumers”. Among other things, Klarna eliminates so-called revolving credit and doubles the payment period for invoices. 

Warnings were repeatedly raised that young people, in particular, could get into debt more quickly via Klarna, also because the effective annual interest rate for installment purchases is comparatively high at 14.79 percent. 

Last but not least, short videos of young Klarna users who posted their open claims with the hashtag “#Klarnakrediten” are trending on the Tiktok social media platform. Klarna is currently trying to break away from this image – in debt but hip – and has announced mentioned product changes.

In addition, the company wants to ensure more transparency and provide information on the so-called Wikipink website about which Klarna products are used most frequently, how the group makes money – for example about the reminder fees, how the use of Klarna affects the SCHUFA score of customers and statistics on who uses the app at all. This data should be publicly available from Monday.

“Klarna has both the opportunity and the responsibility to drive change towards an improved financial situation for consumers worldwide,” explains Sebastian Siemiatkowski, CEO of Klarna

Specifically, Klarna is making these changes to three products or introducing these new products:

• Pay Later (purchase on account): The payment period is extended from 14 to 30 days to offer customers “more time and flexibility when paying” and to reduce the risk of forgetting to pay.
• Pay in three: Customers can use it to spread the payment over three interest-free installments. The first payment is made upon purchase, further installments after 30 days.
• More free payment reminders: Customers should be reminded a total of six times by email, via the Klarna app and by post. Klarna wants to help customers pay on time. 

Klarna is getting rid of the following products:

• Revolving credits: Klarna does away with all perpetual credits and replaces them with fixed installments with a clear end date.
• Pay in month X: The paid option that allowed customers to postpone their payment to another month is no longer available. According to Klarna, customers already have flexible payment solutions with Pay Later 30 and Pay in Three.