One of the most popular forms of payment method used by players at UK online casinos has announced radical plans that could affect the credit rating of their customers.
Klarna has grown to become the premier ‘buy now, pay later’ (BNPL) operator on UK soil, but as of June 1 they will start reporting the outstanding debts of their customers to credit agencies – that could affect casino gamers’ credit ratings.
Reports online suggest that representatives from Klarna have sat down with officials from two of the leading credit firms, Experian and TransUnion, to flesh out the deal, and comes as a direct response to political pressure on payment platforms like Klarna to stop consumers taking on more debt than they can afford to pay back.
All payments, whether they are made on time, later than the deadline or go completely unpaid, will be reported.
It means that credit card companies will be able to see a full list of their potential customers’ gambling transactions – and outstanding payments with Klarna – before agreeing (or not) to offer finance options to them.
However, the new measures will take 18 months to have any impact upon credit ratings, meaning that those with outstanding debts with Klarna now won’t be affected until the end of 2023.
Credit Score Draw
The government is reportedly looking to crack down on the BNPL sector, which remains unregulated in the UK, and Klarna’s proactive actions are thought to have pre-meditated any legislation that ministers are preparing to bring in to help the mounting debt problem as the cost of living increases.
Many people continue to feel pressured into artificially improving their credit score ahead of mortgage applications and the like, and that trend has seen individuals taking out high interest credit cards from their bank and other financial institutions to boost their rating.
But Klarna’s UK chief, Alex Marsh, believes his firm’s new approach will help to reverse the trend of consumers taking out high-risk credit.
“It is alarming that UK consumers are still being forced to take out high cost credit cards to demonstrate they can use credit responsibly and build their credit profile,” he said.
“That will start to change on June 1 this year, as the vast majority of the 16 million UK consumers who make Klarna BNPL payments in full and on time will be able to demonstrate their responsible use of credit to other lenders.”
However, some may turn to alternative BNPL providers – including those that charge higher rates of interest – in order to ‘hide’ their gambling activities from credit agencies.
Klarna have already made steps to update their policies as far as online casino gaming is concerned, and in April they announced plans to enable banks to implement voluntary gambling ‘blocks’ on payments made by its subsidiary company, SOFORT.
Typically, ‘open banking’ payments – including those made via e-wallets – have not had mechanisms that allow gamers to block deposits into their casino accounts, in the same way that debit card firms have introduced. According to Klarna, more than 400,000 customers at banking firm Monzo have already activated the gambling block.