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Klarna's Siemiatkowski joins CNBC’s ‘Money Movers’

Last week, Sebastian Siemiatkowski appeared on CNBC’s Money Movers with Carl Quintanilla and Leslie Picker to discuss Klarna's perspective on the latest CFPB guidance and the benefits of 'Buy Now, Pay Later' (BNPL) services. Siemiatkowski emphasized that BNPL offers a healthier and more sustainable alternative to predatory credit cards. He highlighted Klarna's success in the U.S., where the company now boasts nearly 40 million consumers. Additionally, he announced exciting new retail partnerships with Uber and Expedia, signaling further growth on the horizon.

Today, the Consumer Financial Protection Bureau (CFPB) issued new interpretive guidance relating to Buy Now, Pay Later regulations in the US. From Klarnas initial read, this announcement does not require any major changes to their business and they consider today’s announcement to be a significant step forward in getting BNPL regulation in place in the US.

Klarna have long supported and called for bespoke, proportionate BNPL regulation that fits the unique nature of the products, fosters innovation and ensures consumer protection for years. In their opinon, it is baffling that the CFPB fails to acknowledge the fundamental differences between BNPL and credit cards in their guidance and this announcement does nothing to address the $1.15 trillion in credit card debt.

In the interview with CNBS, Siemiatkowski stated the following:

"In the future, if less people have a credit card where they put their full spending of their full month and then revolve on that, and more people use debit and occasionally buy now pay later, which is a fixed instalment with zero interest, I think we'll have a healthier society from a credit perspective." 

- Sebastian Siemiatkowski, Klarna co-founder and CEO in CNBC interview on 'Money Movers’


Guidance compares apples with oranges

Klarna reporter that trying to regulate BNPL like a credit card is like comparing apples with oranges. So today’s announcement is confusing from their perspective. Klarna is already working to a high standard in investigating disputes, pausing payments, providing consumers with comprehensive billing statements. More information on some of these services can be found in their Buyer’s Protection policy. 

Different products, different protections

Over the last several years Klarna have seen governments across the world, from Australia to the United Kingdom, recognize the fundamental differences between credit cards and BNPL products, therefore decide to create a proportionate regulatory framework that fits the consumer needs.

Credit cards typically allow users to borrow up to a predetermined limit, are underwritten at a moment in time, and charge revolving interest on unpaid balances. They typically come with various fees, including annual fees, and interest charges that can accumulate if the balance isn't paid off each month. Leading to debt of over $1 trillion and rising in the US.

Next steps

It is Klarna's hope that the CFPB will recognize the major differences between BNPL and credit cards, as they operate in fundamentally different ways. Klarna’s BNPL is short-term, no interest credit with no fees when paid on time. At Klarna, they underwrite every transaction to ensure they only lend to consumers who can pay them back, proven by their global defaults of 1%. This model provides consumers with a transparent and predictable repayment structure, making it easier to manage their finances without the burden of accumulating interest.

IPO thoughts

When asked about the potential upcoming IPO and what is he waiting for, Siemiatkowski ends the interview with some valuable reflections. 

I think for us what was critical and has been critical is that we establish ourselves as a big player in the US. We have almost 40 million consumers, we have brands like Uber, Expedia, AirBnb and we are profitable since five consecutive quarters in the U.S. so we feel like this is amazing. But there is much potential to grow which was the secondary thing. We wanted to make sure that we were an IPO company that has most of its growth ahead of itself. So, yes, most of the things are now in place. 

(...) the work is ongoing, but unfortunately I won't be able to give you a date.

- Sebastian Siemiatkowski, Klarna co-founder and CEO in CNBC interview on 'Money Movers’

Watch the full interview here

Read the whole article here