watchdog to investigate klarna bank secrecy

The BNPL spending could swell to $995 billion worldwide by 2026, according to a Juniper Research report last year. Though their research focuses on the U.K., the authors argue their findings are also applicable to the U.S.Ĭonsumers used BNPL services to make an estimated $100 billion in retail purchases in 2021, equal to four times the level of such purchases in 2020, Forbes reported, citing consulting firm Cornerstone Advisors. Guttman-Kenney co-authored the report with Chris Firth, a post-doctoral fellow at the universities of Warwick and Nottingham, and Professor John Gathergood of the University of Nottingham.

'Charging BNPL debt to credit cards is a warning flag for consumer financial protection regulators as it raises doubts on some consumers' ability to pay for BNPL,' the report said. Critics of the installment financing, however, have argued that BNPL services encourage people to borrow more than they can afford-a notion that BNPL providers reject. The trio's paper also estimated that 40% to 50% of all BNPL is charged to credit cards, but Guttman-Kenney said he and his co-authors are revising that estimate, based on feedback from companies in the industry.īNPL providers often argue that their financing service is superior to credit cards because it allows consumers to pay for their purchases in interest-free installments. The BNPL industry 'hasn't really existed that long,' said Guttman-Kenney, who is a doctoral student at the University of Chicago.

It is the first report of its kind examining BNPL payments, according to Benedict Guttman-Kenney, one of the report's authors. Among the challenges he and his colleagues faced in producing the report was a lack of data, he said.

The U.K.'s financial consumer watchdog, the Financial Conduct Authority, called for increased scrutiny of BNPL last year because of “significant potential for consumer harm.' In the U.S., the Consumer Financial Protection Bureau is also taking a closer look at the industry. 'Some consumers may be entering a debt spiral transforming a 0% interest BNPL debt that amortizes over a few installments' into credit card debt with 20% interest rates that can amortize over a decade if they only make a minimum payment, the report stated.

Watchdog to investigate klarna bank secrecy