Buy now, pay later giant Klarna suffered a doubling of net losses in the first quarter as an increasing number of customers failed to pay back their loan installments.
TechSpot reports that Klarna, a major player in the buy now, pay later (BNPL) industry, recently reported that its net losses for the first quarter reached a staggering $99 million, nearly twice the $47 million it lost during the same period last year. The company, which offers its BNPL services to a wide range of merchants, allows customers to purchase items in installments while making money by charging fees to merchants and customers who fail to pay on time.
According to Klarna’s first quarter earnings report, consumer credit losses rose to $136 million, a 17 percent increase compared to the previous year. This trend of BNPL customers struggling to meet their contractual obligations seems to be growing, as evidenced by a recent survey conducted by credit platform LendingTree. The survey found that 41 percent of BNPL users reported paying late on at least one loan in the past year, up from 34 percent a year ago. High-income borrowers, men, young people, and parents of young children were among the most likely to pay late.
The LendingTree survey also revealed that a quarter of BNPL users relied on these loans to purchase groceries amidst rising supermarket costs, marking a 14 percent increase from the previous year. Additionally, nearly 1 in 4 BNPL users reported having three or more active BNPL loans simultaneously. This data raises concerns about the sustainability of the BNPL model and its potential impact on both consumers and the companies offering these services.