As more people turned to online shopping under lockdown, Klarna tightened its lending rules.
Buy-now-pay-later fintech Klarna revealed that it tightened its rules on lending as a result of the financial uncertainty caused by the UK’s lockdown, according to an interview with BBC Radio 5.
Klarna’s UK general manager, Luke Griffiths, told the BBC that it tightened lending just as it “saw our volumes increase” and put this jump in activity down to “reflecting the increase in digital transactions generally.”
Despite the jump in sales and the tightening of lending, Griffiths also told the BBC that he doesn’t expect to see more defaults, which currently sits at less than one per cent of purchases.
Griffiths told BBC Radio 5: "Obviously with people's financial circumstances changing during this period, we have constantly reviewed our policies around the type of customer that we accept."
"If anything, it will be at the front end that we are rejecting consumers because we don't feel they will be able to pay, rather than on the back end which is customers who are unable to pay."
A recent survey from Klarna found that over two thirds (67 per cent) of shoppers use the service to help manage their finances and spread the cost of more expensive purchases and almost half (49 per cent) used the ‘try before you buy’ for convenience.
Klarna has 8.6m active users in the UK and a total of 85m across the world.
The Swedish fintech is also one of the joint highest valued fintechs in Europe, sitting at $5.5bn—tying with digital banking service Revolut and payment processing firm Checkout.com.
The savings account, only available to Raisin’s German customers, has an interest rate of 0.35 per cent.