What is Klarna?
Klarna allows someone to purchase items on credit and gives them 30 days to pay in back in 3 separate instalments. It is not the only app that does this, there are others such as Afterpay and Affirm which almost do the same thing but Klarna has become much more prominent in the industry and most widely known and used by both businesses and people. It currently serves around 150 million people worldwide and can be used in 250,000 retailers.
Klarna can be good
Klarna can be very beneficial for people. It can enable people to purchase an item that they have been wanting for ages and is finally on sale, or an item that there is only a limited number of and it likely to see out before they get the money for it. Klarna helps people to purchase items in a lot of different ways. Firstly, by offering the money to people so they can make the purchase and then pay it back at a later date, secondly by offering discounts on items and thirdly by keeping an eye on items that someone wants to purchase and then notifying them if the price decreases so they can buy the item at a price most suitable to them.
In some ways apps like Klarna can be beneficial to the whole country as they keep the money flowing around the country and across the world. Klarna does this in a few different ways. If a company gets more money from consumers, then they will make a large revenue, causing them to pay more tax and therefore the government will have more money. This money is beneficial to us all as it can then be spent in places that we all use such as the NHS or schooling. But if the companies do not get as much money from consumers, then they cannot pay as much tax and they may eventually be forced into bankruptcy which will affect the market greatly.
Klarna's unhelpfulness
However, whilst Klarna acts, in some ways, similar to a credit card it does not use the same checking process of ensuring that the debt a person creates can be paid off by them within the time and instead will just decrease their credit score if the payment is not made. Some customers may not realise that this will happen to them if they do not pay and some people may not be mature enough to realise the consequences that this may have on their future credit and the impact this may bring them when taking out a loan or trying to purchase an item such as a house.
Most companies that use Klarna produce luxury items that are not essential to everyday life. The issue with this is that people want these items but cannot afford them and therefore should not be purchasing them at the given time. If you cannot currently afford then why are you trying to purchase this item which could lead to debt issues. Luxury items should only be purchased once the customer has enough money to do so and not otherwise.
Furthermore, if the customer had enough money to originally pay for what they wanted, then allowing them to only pay 25% now means that there is an extra 75% of the money that they expected to spend which is available to purchase other items. This may benefit the store and Klarna but it affects the customer greatly. It will end up with them paying 4 times their original amount which means it is more likely for them to go into debt.
Services such as Klarna can also very easily lead people into gaining a shopping addiction. The idea of only paying 25% of the price can lead to people into the temptation of buying lots of things that they would not have otherwise bought meaning that when the time comes to pay their instalments, they would not be able to pay Klarna back. This can lead to a lot of issues that will just continue with the ease of use of Klarna and other services meaning that if the customer gets banned from one of them for not paying, then they can just find another service to use and this can just keep going and affecting their credit, life and the lives of those around them.