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Klarna to introduce late payment fees for UK customers

Klarna, the Swedish-based buy-now-pay-later fintech, has announced that it will begin charging UK customers for late payments starting from 16 March.

The company will charge customers £5 for late payments made after a seven-day grace period and at least four reminders have been sent.

Klarna has already been charging late payment fees in other countries, including the Netherlands and Belgium, where they have reportedly improved on-time payments by 20%.

Late fees drive better outcomes for customers, says Klarna

According to Klarna, not charging late fees may feel customer-friendly, but it drives the wrong behaviour.

The company has observed that the absence of late fees leads to less favourable outcomes for customers, as they have less reason to pay on time and are more likely to fall behind.

Klarna has concluded that having no fees is not in the best interest of its customers.

New features to support customers in arrears

To support customers who fall behind on their payments, Klarna is introducing a recovery programme that will provide additional support for those in arrears. The company will also introduce a financial awareness test that customers can take to have their late fees waived in the first six weeks after the fees are introduced. Additionally, Klarna will introduce a feature that automatically takes money from a customer’s account to cover the payment.

Fair and reasonable late fees

James Daley, managing director at Fairer Finance, commented that used responsibly, late fees provide an important deterrent as well as a reminder that buy now pay later is a form of credit and needs to be taken seriously as a loan.

He also emphasised the importance of fair and reasonable late fees that do not become an income stream for credit providers. Daley welcomed Klarna’s move to provide additional support for those who fall behind.

Final Thoughts 

Klarna’s decision to introduce late payment fees for UK customers may not be welcomed by everyone. However, the company’s observations that not charging late fees leads to less favourable outcomes for customers, and that having no fees is not in the best interest of its customers, are worth considering.

The new features that Klarna is introducing to support customers in arrears, such as the recovery programme and financial awareness test, are also positive steps. It remains to be seen how customers will respond to the new late fees and whether they will lead to more on-time payments.

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