Klarna customers are struggling to pay back the installment loans they take with the popular “buy now, pay later” service.
The Swedish company’s net loss doubled in the first quarter, even with an increase in user base and revenue. Klarna reported on Monday after suspending plans to publish concerns about tariffs and economic uncertainty. Klarna’s consumer credit losses swelled 17% in the first quarter from the same period last year to $136 million.
Throughout the industry, BNPL borrowers are increasingly lagging behind in paying their loans. A survey conducted last month by credit platform Lendingtree found that 41% of users said they paid in the second half of last year, starting from 34% the previous year. At least a quarter of BNPL users took out their loans to pay for grocery items, up from 14%, according to the survey.
BNPL’s client debt tensions coincides with broader indications of growing household finances. U.S. consumer debt rose by $167 billion to a record $18.2 trillion in the first quarter, reported last week. Credit card balances have declined, as they are made with car loan liabilities a few months after the holidays. However, as the Trump administration cracked down on federal student loan borrowers, student loan delinquency has skyrocketed from under 1% to over 8%.
Against this background, BNPL services continue to expand their scope to the consumer economy as a whole. Klarna recently declared that she will become Walmart’s exclusive BNPL provider. And in March, they joined forces with food delivery service Doordash to add to an industry-wide effort that introduced nearby access to increasingly ubiquitous credits even for small and everyday purchases.
A Klarna spokesperson said the 17% jump in consumer credit losses “doesn’t talk much about US consumers,” and instead pointed to the company’s credit losses as a share of the total amount loaned or “total merchandise value.” The metric rose from 0.51% to 0.54%, a spokesman said:
Meanwhile, the Trump administration has been working to tighten regulations on BNPL services, even as it becomes a source of financial difficulties for consumers. Earlier this month, the Consumer Financial Protection Agency said it would no longer enforce Biden-era rules, which treat BNPL providers as credit card lenders.
This rule was issued as “guidance.” This is a practice that became more common under Rohit Chopra, the then CFPB director who was fired in February. Some consumer finance experts say the agency’s current leadership has made it easier to roll back recent policies.
Many consumers are cutting their spending as the prices of many purchases continue to rise. According to a New York Fed survey released this month, household spending rose 4.5% from April last year, down somewhat from the annual rise of 4.6% in December. Many said they were driven by pullbacks among households under $100,000 a year as shoppers became more cautious about purchasing amounts.
Still, they found that growth in average household spending remains much hotter than before the pandemic.