LONDON–An announcement by the fintech BNPL provider Klarna that it will begin reporting transactions to the credit bureaus is being described as a “big blow” to other financial institutions as it competes in the credit card space.
Jaimini Pattani, a banking analyst with GlobalData, noted that for a long time the most “significant benefit” of using credit cards over Klarna, or other Buy Now, Pay Later options, was the fact that credit cards allowed a user to build up a credit score. Now that customers can build their credit using Klarna they no longer need to take out high-interest credit cards, she said.
“This is a potentially damaging move for banks, which could have further competition if other Buy Now, Pay Later providers follow Klarna’s lead,” said Pattani.
‘Threat to Mainstream Lenders’
A GlobalData survey found that almost half of under 35s in the U.K. don’t hold a credit card, and Klarna’s recent announcement will likely impact this figure further, the company said.
“Furthermore, the survey also found that across various markets, customers selected their main credit card in the hope that it will help them build up a credit score. If other Buy Now, Pay Later firms in Asia or the USA allow customers to build up their score, the threat for mainstream lenders increases,” Global Data said.
According to research by GlobalData, in the U.S., 27% of customers use a credit card to build up their credit score only, compared to Singapore at 25% and both Hong Kong and the U.K. at 22%.
“While some customers will likely be disappointed by the news, it is unlikely they will apply for a credit card as an alternative,” the company added. “However, for the younger customers looking to get themselves on the property ladder, building up a credit score through Klarna will likely be much more appealing than other high-interest forms of credit.”
Yes, FOMO is Very Real in this Case!
Don’t forget to check your Spam/Junk email folder if you haven’t been receiving your free, popular and daily CUToday.info news headlines.
And if you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time.
CUToday.info has received very positive response from readers following the move to an improved provider of the daily headlines, but many also noted they did need to go to their Spam/Junk folder and mark it as safe.
The new email solution has not only improved every reader’s delivery experience, but it also features a fresh, new format that is easy to read, especially on mobile devices.
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com