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Payment processing and global retail banking platform Klarna secured $1 billion through its equity funding round to accelerate international expansion and further capture global retail growth. The company's valuation is now $31 billion and it is claiming to be the highest-valued private fintech in Europe and second-highest worldwide. Klarna offers point-of-sale loans for online and in-store purchases through its mobile app. These loans allow customers to buy now and pay later at popular retailers.

Popular "buy now, pay later" shopping services like Klarna will fact stricter regulation under proposals announced by the U.K. government Tuesday. The Treasury said buy now, pay later (BNPL) firms would come under the supervision of the Financial Conduct Authority (FCA), which regulates financial services firms and markets in Britain. Such firms will be required to conduct affordability checks before lending to customers, the government said, while people will also be allowed to escalate complaints to the U.K.'s financial ombudsman. https://www.gov.uk/government/publications/government-announces-intention-to-regulate-buy-now-pay-later

Traditional consumer credit companies are also engaging in buy-now-pay-later (BNPL) plans. Mastercard has expanded its payment options by partnering with FinTech Jifiti to allow both merchants and issuers to offer credit and consumer financing to Mastercard holders. The company had already forged alliances with Fly Now Pay Later, Splitit, Divido and Pine Labs to provide BNPL services worldwide. Per an Accenture figure cited by Mastercard, the BNPL industry boasts an astronomical market value of $1.8 trillion.

New Zealand-based buy-now-pay-later (BNPL) platform Laybuy has seen a 162 per cent increase in the total amount spent through its platform over the past year. Laybuy's customers have spent over NZ$508m (~£238m) through its platform and the BNPL fintech has also seen a 48 per cent increase in the number of active merchants using its financing options since the end of September last year.

Shoppers can use Afterpay to buy items in select U.S. retail stores using their Afterpay card, a virtual, contactless card stored in their digital wallet. Just like using Afterpay online, customers can pay for their in-store purchases in four installment payments, without the need to take out a traditional loan or pay upfront fees or interest. Afterpay first introduced its in-store solution in 2016 in Australia and New Zealand (ANZ) and became one of the only online payment companies to successfully offer its service in physical stores.

"Mastercard is set to introduce a new Buy Now, Pay Later (BNPL) offering, Mastercard Installments for its customers in the United States, Australia and the United Kingdom. The program gives consumers a flexible, ubiquitous way to pay online and in-store through equal, interest-free installments - an additional choice to debit, credit or prepaid cards. Mastercard Installments enables banks, lenders, fintechs and wallets the ability to offer BNPL experiences at merchants with flexibility across the entire acceptance network."

Square, the digital-payments platform led by Twitter founder Jack Dorsey, agreed to buy Australian buy-now, pay-later company Afterpay Ltd. for $29 billion in an all-stock deal. Square said the buy-now, pay-later concept represents a chance to capitalize on a shift away from traditional credit, especially among younger consumers. The plan is for Square to integrate Afterpay into both its consumer Cash App, and its Seller product for small businesses.

Credit losses at Klarna, the Swedish "buy now, pay later" company, more than doubled in Q2 2021. Klarna said that credit losses tended to increase when it entered new markets such as recent launches in New Zealand, France, and Spain. It added Poland last week. Klarna has faced controversy in some countries as critics have argued it encourages younger people to spend money that they do not necessarily have and then pay back in instalments. Klarna positions itself as an alternative to credit cards and their high rates that drive economic inequalities, with those who can afford to pay off their balances each month reap rewards through loyalty schemes while those who can't afford to simply get into more debt.

Amazon is testing Affirm's are testing "buy now, pay later" (BNPL) payment platform firm with select customers, and plans to make Affirm more broadly available to its customers in coming months. On the platform, customers are told the total cost of the transaction up front and have the option to split the total cost of purchases of US$50 or more into simple monthly payments at checkout. There are no late or transaction fees.

"Klarna announced the addition of the ability to "Pay Now" for UK customers alongside the option to Buy Now, Pay Later (BNPL). Klarna said it took these actions after being informed by the UK Financial Ombudsman Service (FOS) that complaints about BNPL products currently could not be referred to FOS on a voluntary jurisdiction basis. Klarna said it has established its own complaints adjudicator for consumers who remain dissatisfied with how a complaint against Klarna has been handled. Klarna addeed that it has worked with consumer group, Fairer Finance, to make sure that terms & conditions are easy to understand."

According to a study on buy now, pay later (BNPL) apps done by The Ascent, 67% of millennials don't have a credit card. For some, that's because they can't get approved, and others prefer to avoid credit. Many don't think it makes sense to use a credit card for small, everyday purchases and are worried about the impact of credit cards on their credit scores. Which one is better: BNPL apps or credit cards? The answer, as you might expect, is: It depends.

"It depends on what kind of flexibility you need with your financing, how much either option will cost you, and whether you're looking for predictability or incentives."

While "buy now, pay later" (BNPL) can offer benefits compared to credit cards, there are lurking issues that could present challenges to the companies this holiday shopping season. In complaints to the U.S. Consumer Financial Protection Bureau, consumers have said that they've had problems with purchases, either because they couldn't make a return or get a refund, or got charged with fees they didn't understand. Right now, BNPL is not regulated in the way that credit cards are in the United States. That means there are no standards for disclosures on fees, amounts owed, credit reporting and payments. Even the due dates of payments are not as clear as a credit card with a consistent payment date. The U.K. and Australia, where BNPL has taken off even faster than in the United States, have placed these products under a regulatory regime. U.S. regulators are likely to follow suit.

The Australian government will announce major reform to payment systems, including broadening the definition of services and products that can be regulated. Crypto exchanges will be brought within the regulatory perimeter, and the treasury will be working on a CBDC with the Reserve Bank. The proposed regulation will also take aim at "buy now, pay later" services.

"Younger consumers of Buy Now Pay Later (BNPL) products, which require little or no credit history, now hold the most defaulted accounts in the programs. While 11% of all borrowers paid at least one late fee on the installment loans in 2021, 18% of those aged 18 to 29 fell behind on their payments, according to a Federal Reserve report. The programs, which gained popularity as the pandemic forced shoppers online, are now in the sights of credit bureaus. Equifax and Experian have said they'll start including BNPL purchases on consumers' credit reports - and that loans sent to debt collectors can also be reflected."

"Losses at Swedish [buy now, pay later] payments provider Klarna reported a net loss of SKr6.2 billion ($581 million) for the first half of 2022, compared with SKr1.4 billion a year earlier. (Buy now, pay later services allow consumers to defer or divide payments into instalments.) Klarna attributed the deepening losses to higher employee costs, investments in integrating newly acquired Swedish price comparison service PriceRunner and rising credit losses, reflecting the greater difficulty of underwriting new customers with limited credit histories."

The U.S. Consumer Financial Protection Bureau (CFPB) published research on the U.S. Buy Now, Pay Later (BNPL) market, based on data from Affirm, Afterpay, Klarna, PayPal, and Zip Co. It identifies several benefits of BNPL loans over legacy credit products (no interest and sometimes no late fees, and ubiquitous, easy to access, simple repayment structure) and a number of potential consumer risks (a requirement to use autopay for all loan payments, data harvesting and borrower overextension).

The Bank for International Settlements (BIS) reviewed buy now, pay later (BNPL) payment schemes. It found that, BNPL is more widespread in countries with greater e-commerce penetration, higher inflation, more inefficient banking systems, and looser financial and consumer protection regulation. Versus traditional consumer credit, BNPL users are typically younger, with less education, more debt, lower credit scores and higher delinquency rates. BNPL schemes are accessible even to consumers without a credit history or stable income and do not typically affect their credit scores. Customers pay interest-free instalments, which are typically not reported to credit bureaus, while merchants pay fees to increase sales and shift credit risk to BNPL platforms. Relying primarily on those fee revenues, BNPL platforms have faced profitability challenges due to high operating costs and rising credit losses.

The US Consumer Financial Protection Bureau (CFPB) issued a series of orders to five companies offering "buy now, pay later" (BNPL) credit. The orders to collect information on the risks and benefits of these fast-growing loans went to Affirm, Afterpay, Klarna, PayPal, and Zip. The CFPB is concerned about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology.

Full year 2021 operating losses at Swedish "buy now, pay later" (BNPL) group Klarna soared to SKR7.1 billion (versus SKr1.4 billion reported in 2020), driven by expansion to fresh markets and the challenges of underwriting a massive inflow of new customers. Credit defaults of SKR4.6 billion (versus SKR2.5 billion in 2020) were a significant proportion of losses. On the other hand, net operating income was up 38% from 2020, with the U.S. market continuing to be Klarna's fastest growing market (71% year-over-year growth).