Klarna Bank AB has received regulatory approval to offer credit and payment products in the UK. The approval, granted by the Financial Conduct Authority (FCA), allows Klarna to continue its operations in the UK market. The authorization comes just in time, as a temporary approval granted to the company in the aftermath of Brexit was set to expire in just five weeks.
To ensure compliance with UK regulations, Klarna established a UK-based entity called Klarna Financial Services UK. This entity will enable the company to offer all of its consumer-facing products in the country. However, the authorization from the FCA does not cover Klarna's popular buy-now-pay-later loans, which the company believes should also be subject to regulation.
While Klarna has a full European banking license and has already introduced term loans and card products in the UK, it has long argued for the regulation of its buy-now-pay-later offerings. The FCA's approval now puts Klarna's successful UK business on a secure regulatory footing, especially with anticipated regulation of buy-now-pay-later services on the horizon.
Klarna's recent quarterly operating profit, marking its first in four years, has given the company a boost as it prepares for an upcoming initial public offering (IPO). As Europe's previous most valuable startup, Klarna provides credit services to approximately 150 million online shoppers worldwide, helping consumers spread out the cost of their purchases.
The FCA's authorization signifies that Klarna has been assessed for its approach to ensuring affordability of interest-bearing loans for consumers and providing suitable forbearance to those facing financial difficulties. Additionally, regulated lenders are required to demonstrate their strategies for dealing with vulnerable customers. Although the FCA's statement did not mention Klarna by name, it highlights the importance of addressing these key aspects within the lending industry.
With its UK operations now on a solid regulatory footing, Klarna is well-positioned to continue its growth in one of its key markets. This approval is not only a validation of Klarna's business model but also their commitment to responsible lending practices, ensuring the financial well-being of their customers.