Klarna, the popular buy now, pay later (BNPL) provider, has fired a direct shot at traditional UK banks by launching a new instant peer-to-peer (P2P) payments service for its millions of customers.
How Klarna's New Payment Feature Works
The service, which has gone live in 13 countries including the UK, allows users to send money instantly to friends and family. Currently, transfers are only possible between Klarna users, but the firm has confirmed plans to expand this functionality in the future.
To make a payment, a user selects a recipient using their phone number, email address, a QR code, or a saved contact. After entering the amount, Klarna conducts automated fraud and eligibility checks before processing the transfer.
A Direct Challenge to High-Street Banks
Sebastian Siemiatkowski, Klarna's co-founder and CEO, stated the move is a direct response to customer frustration with incumbent financial institutions. "Customers are sick of the friction and fees of traditional banking," he said, pointing to the rapid uptake of the Klarna Card as evidence. "With peer-to-peer payments we're making it even easier to manage all of your payments through Klarna, now including small transfers, making managing your money quicker, easier, and cheaper."
This update follows the recent launch of Klarna Balance, a digital wallet where users can store funds, earn cashback, handle refunds, and pay for items with their linked Klarna Card.
Understanding the Risks and Upcoming Regulation
While Klarna promotes interest-free periods on options like "Pay in 30 days" or "Pay in 3", customers must be aware of potential costs. Missed payments can incur a £5 late fee on orders of £30 or more, or a charge of 25% of the purchase price for orders under £20.
Critically, payment information can be shared with credit reference agencies. A missed payment may negatively impact a user's credit report, though consistent, timely repayments could demonstrate responsible borrowing.
This expansion comes as the Financial Conduct Authority (FCA) is tightening its grip on the BNPL sector. Due to concerns about consumers accumulating unaffordable debt, the regulator has launched a consultation. Under new proposals expected to take effect when BNPL falls under FCA regulation in July 2026, providers will be required to conduct affordability checks and offer support to customers in financial difficulty.
Firms will have a six-month window to apply for full authorisation once the new regime begins. Furthermore, borrowers will gain the right to complain to the Financial Ombudsman Service if they encounter problems, bringing BNPL in line with other regulated credit products.
