Klarna Crisis: Is this the crash of Buy Now, Pay Later?

Klarna, the Swedish fintech company that has been a main driver of widespread use of Buy Now, Pay Later (BNPL), is in the midst of a financial crisis as increasing numbers of consumers fail to repay their BNPL obligations.

In the first quarter of 2025, Klarna reported a net loss of $99 million! This is more than double the $47 million loss from the same period the previous year.

These enormous losses suggest that the BNPL sector may finally be reckoning with the financial pressures it has sold itself as the solution to. What this means for consumers is yet to be seen – but it will certainly reshape the landscape of e-commerce and everyday spending habits.

Consumer credit losses

Klarna’s crisis is tied to rising consumer debt in the BNPL sector.

BNPL is now being used for everyday essentials like groceries and utility bills – areas traditionally not associated with credit usage. Yet this surge of defaults suggests that while people are still struggling to stay on top of their finances and keep up with their payments.

A 2025 survey by LendingTree found that 41% of BNPL users reported making a late payment in the past year, up from 34% the previous year.

It seems that the allure of interest-free payments, and possibility of spreading out the costs of essentials, is still not able to take away the financial strain people are under. In fact, when people accumulate multiple outstanding obligations, BNPL may actually make people worse off.

A spiralling debt crisis

We have previously written about the risks of BNPL.

Unlike traditional credit products, BNPL services often lack comprehensive credit reporting, making it easier for consumers to overlook the cumulative debt.

Deals are often hard to understand and keep on top of – with serious consequences if you don’t pay on time. Some of the unregulated services offered by these systems may not affect your credit report, but our users tell us they’ve been passed to debt collectors after getting into difficulties.

While they are extremely popular, people using BNPL do not currently have the usual full range of borrower protections when taking out this type of loan. With a lack of regulation comes a lack of accountability by these providers and less consumer protections.

To mitigate the mounting defaults, Klarna has introduced late fees in the UK. Yet while these may put pressure on people to pay back their debts promptly, increasing the amount they owe may only be adding to a debt crisis spiralling out of control.

The end of BNPL?

Charities, the government, consumers and consumer advocacy groups have long been pushing for enhanced oversight of the BNPL sector, emphasising the importance of affordability checks and consumer protection.

The UK’s Financial Conduct Authority (FCA) has now ensured that companies like Klarna are required to adhere to responsible lending practices by conducting thorough affordability checks.

Yet the ongoing crisis underscores how the sector’s growth has always come at the expense of financial stability of UK citizens – especially the younger generation who are the demographic making the most use of these finance arrangements.

While we may see more comprehensive regulation to ensure that consumers are adequately protected, it’s important for consumers to be aware that BNPL may be undergoing a transformation.

How can we help?

Our free tool makes it easy to raise a complaint about BNPL. However, it is vital that consumers become better informed of the regulations, benefits and drawbacks of these credit agreements.

BNPL also takes advantage of long-studied consumer biases, such as our drive for immediate gratification and unrealistic optimism about our ability to pay off costs in the future. If you’ve found yourself lured in by BNPL, read up on the common marketing strategies that drive impulsive spending and how you can resist them.

If you have any thoughts on this topic, or any other consumer issues you would like us to cover, feel free to get in touch with us at support@resolver.co.uk.