Buy now, pay later will soon affect your credit score in the UK
Summary
Thats now set to change in the U.K. Buy now, pay later giant Klarna says it will start reporting data on customers usage of its products to credit bureaus in the U.K., gearing up for incoming regulations aimed at reining in the sector over fears it is putting young people into debt. The development sets a major precedent for the nascent buy now, pay later, or "BNPL," sector, which has flourished in no small part thanks to a smoother application process and lack of regulatory oversight. "Credit reporting is a double-edged sword in that it can be used to punish borrowers but also to incentivise and reward healthy financial habits," Gwera Kiwana, product manager at U.K. fintech consultancy 11:FS, told CNBC. BNPL companies face a reckoning in the U.K. and other countries, as regulators look to crack down on such services amid worries they are encouraging consumers — Gen Z and millennials, in particular — to spend more than they can afford. "That will start to change on 1 June this year as the vast majority of the 16 million U.K. consumers who make Klarna BNPL payments in full and on time will be able to demonstrate their responsible use of credit to other lenders."