Buy-now-pay-later (BNPL) firm Klarna will soon start sharing customer data with UK credit agencies, amid concerns surrounding the increased use of the money lending service.
According to recent research from Checkout.com, 23 per cent of consumers in Europe are now using BNPL, and the market is predicted to be worth $4trn (£3.2trn) by 2030.
As a result, MPs and lobbyists have called for more regulation of the BNPL space, in order to reduce the potential for consumer harm.
Klarna said that the decision to report customer debts to credit agencies came after two years of talks with Experian and TransUnion.
The fintech payments company will start reporting UK customer debts for the first time from 1 June. This means that lending companies will soon be able to see transactions and debts when conducting credit checks on potential borrowers.
Pundits have said that this is good news for responsible borrowers as it may result in higher credit ratings, but bad news for those who regularly miss payments.
Read more: P2P firms expand into BNPL products
“If you’ve ever been late paying what you owe Klarna, from June, your credit score may be negatively impacted, meaning you might find it more difficult to be approved for financial products in the future, including for things like mobile phone contracts, credit cards, loans and mortgages,” said David Beard, editor-in-chief of Lendingexpert.co.uk.
Joshua Gerstler, chartered financial planner at The Orchard Practice, added that “the more transparency around buy-now-pay-later companies, the better.
“Many would-be and existing mortgage borrowers may think twice about this type of debt which will now start to appear on their credit report,” he said.
“For those that pay on time, it will potentially help boost their credit score, but for those who do not pay on time, it is likely to cause them problems.”
Several peer-to-peer lenders have entered the BNPL space in recent months, including Fellow Finance and former P2P giants Funding Circle and Zopa.
However, the government is planning to change the law to bring some of the current forms of unregulated BNPL products into Financial Conduct Authority regulation.