FCA authorises Klarna to provide regulated credit and payments services

AI-powered buy now, pay later provider Klarna has received authorisation from the Financial Conduct Authority (FCA) to offer regulated credit services and payments in the UK, ahead of the expiration of the FCA’s Temporary Permissions Regime (TPR).

Since Brexit, fully-licensed Swedish bank Klarna Bank AB continued to provide regulated services in the UK under the TPR.

Given that the regime will expire on 31 December, Klarna has established a new UK-based entity, Klarna Financial Services UK, which will provide all consumer-facing services in the UK.

The FCA authorisation applies to Klarna’s regulated credit and payment products, but not to its short-term interest-free BNPL products, which remain outside the scope of the Consumer Credit Act.

Klarna Card, its ‘One-time’ card, ‘Instore’ card and Open Banking-based payment services are all regulated.

“Klarna has always operated under the oversight of the FCA, delivering our regulated products to a very high standard of customer care,” said Abby Vickers, head of Klarna Financial Services UK.

“As well as enabling us to continue to provide our regulated products, the FCA approval puts Klarna’s successful UK business on a secure regulatory footing ahead of the expected regulation of BNPL.”

In August, Klarna reported “strong growth” across its European markets, led by the UK, at a time when “other, smaller players dial back their commitment” or exit entirely.

It has launched in 11 European markets since 2020, most recently in Romania and Czech Republic, and has “amassed” 100 million European consumers.