The buy-now-pay-later fintech can be a great way to split the cost of expensive purchases.
Woke 👌 Easy to use and a great payment option for most major UK retailers
Broke 🙁 Can inadvertently damage your credit score if you miss a repayment
Klarna can be a great payment tool for those who want to hold off on paying for something straight away, like making a big clothes purchase with the intention of returning most of it or buying bigger household items. However, it can also cause people to inadvertently damage their credit scores because of missed payments and defaulting on payment plans.
It’s hard to deny who Klarna’s target market is—the ‘Millennial pink’ website and sleek aesthetic is a dead giveaway. Its target market is even more evident when you look at the main vendors using Klarna—the list of young-people targetted shops is endless, ASOS, Missguided, Topshop and so on. But, because of its invisible credit limit, Klarna is potentially damaging the credit scores of unsuspecting millennials who are looking to delay certain payments.
Signing up (5/5)
Signing up could not have been easier. First of all, I had to have something to buy. So I hopped onto ASOS, one of Klarna’s first UK partners and added several items to my basket.
All I had to do was select the ‘buy-now-pay-later’ button at checkout, make sure my date of birth was correct (you have to be over 18 to use Klarna) and click checkout. There was no fuss or struggle, no complicated signing up process. It really was that simple.
In the background, Klarna runs quick credit checks through its third party credit provider TransUnion. According to Klarna, each customer is subject to a quick credit check to ensure they aren’t entering into an agreement that they will default on.
Unlike normal credit agreements, Klarna says there’s no set credit limit and “each purchase is subject to an individual availability assessment.”
As mentioned earlier, Klarna uses a third party credit provider called TransUnion. After a quick Google, I can see that TransUnion is an American credit reporting agency that currently holds the information of over one billion customers across 30 countries and is used by 65,000 businesses around the world.
At the end of the day, using Klarna is like taking out a short-term loan, and defaulting on that loan can still have very serious consequences for your credit score. It can even prevent you from taking out future credit agreements.
There are two main ways to access your Klarna account, through its website or app, but my main gripe is just how complicated logging into its website is.
First, you have to put your email in and wait for a login link to arrive at the email address you entered, and finally, once you’ve clicked that link you are redirected to their website and can log in to see your purchases.
The problem is that this email often doesn’t come through immediately, so you’re left waiting for a couple of minutes.
In contrast, the app couldn’t be easier, you can either log in with your email or use your Touch ID or Face ID.
The app has a 4.9-star rating from nearly 30,000 reviews on the App Store and a 4.5-star rating from over 150,000 reviews on the Google Play app store, and I can see why. Its sleek user interface is easy to navigate and you can pause or pay a balance all the app.
Frustratingly, there is no platform to buy directly on the Klarna website or app, instead, you have to go to the retailer and select Klarna at the checkout. However, the shop directory does take you directly to the website of the shop you are trying to purchase items from.
In addition, the app only shows you what you’ve purchased in the past and your current balance. For anything else, such as the store directory, you’d have to go to the website.
Customer service (3.5/5)
I found the customer service to be a bit clunky and not the easiest to access as you have to press several buttons to even get to the customer service page. On both the website and the app I only had one option to select, which was purchases.
I actually wanted to ask about Klarna’s credit limits (as mentioned above) which obviously doesn’t fall into this category. This meant I had to select one of the previous payments I had made using Klarna and go through the questions with Klarna’s chatbot before being able to reach an agent—not ideal.
Finally, after selecting the ‘chat to an agent’ button I was connected within a matter of seconds—I imagine that at peak times this could take much longer, or maybe I just caught it at a good time?
It also appears that you’re not able to chat about the same purchase within a certain time frame—not a criticism, just an observation. This could be problematic if you had a real issue with one of your purchases through Klarna, but luckily I was asking an unrelated question and wasn’t in dire need of help.
The agent I spoke with was knowledgeable and answered my questions quickly and in fairly plain English so that it was easy for me to understand.
However, if, like me, you can sometimes be very unorganised and forget to return your items right up until that 28-day limit then you might receive some fairly passive-aggressive letters from Klarna.
On one occasion I returned several items from an ASOS order and still received several letters letting me know that I was yet to settle my balance.
On the other hand, this could be a positive, as it means I’m much less likely to leave it to the last minute again for fear of facing the wrath of Klarna.
It’s easy to see why Klarna is so popular, it offers simple and straightforward credit that is incredibly attractive to its millions of customers. In 2019 customer spending jumped by nearly a third to $35bn, despite the Swedish fintech reporting a loss for the first time.
In my opinion, Klarna is great for big purchases that you can split into several, smaller payments. However, I wouldn’t regularly use it for smaller purchases as I don’t really see the point in delaying the payment of less expensive purchases.
It should also be noted that the only retailer I have ever used Klarna with is ASOS. I have used the buy-now-pay-later service several times for several purchases, all under £200, to take it for a bit of a spin. I concluded that I much prefer the satisfaction of money going back into my account after a return, rather than the other way around.
All in all, I think Klarna is a useful platform for those wanting to have a simple and easy to access payment plan for big purchases, but I don’t think it is necessarily worth the hassle, or impact on your credit, for smaller, everyday purchases.
Signing up 5/5
Credit 2 / 5
Returns 4 / 5
Customer service 3.5/5