I assume a big difference is the protections applicable.
A credit pot and virtual card, could be functionally equivalent to a fresh debit account with an agreed overdraft. Whereas a credit card would have section 75 etc
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If apple seeks a phone directly they get a lot more than if sold via EE (as an example) so makes sense for them to pay a small fee to Barclays which is less than the cut to the reseller to get the direct sales.
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Klarna is interesting in that they also offer a method of creating a one time credit card to use on retailers that donāt accept Klarna. Iāve wondered how they can possibly make money on that method.
Tymit does credit card. After each purchase one can switch it to instalments plan. With split into three months with zero APR. It is, overall, similar-ish to regular credit cards with upto 56 days interest free. One pays 2/3 earlier, and 1/3 later, instead of the full monty at the avelanche day.
So one could do credit card pot / virtual card with APR-free split into 3 months.
Curve does the same with up for 12 months and 1K limit. No APR either so far, although not sure how theyāll earn money on it without APR
Late to the thread and skipped a few comments so apologies if Iām repeating some sentimentā¦
On the topic of predatory lending - I do think BNPL can and does slip into that territory - you just have to look at a fewā¦. Dubious uses of Klarna on āfast fashionā sites like ASOS and similar.
Often advertised in a āget your fashion haul nowā kind of way, and Iām almost positive thatās paired with a solid understanding of consumer behaviour; I imagine thereās a lower likelihood of returning something once the product is āin handā vs buying it when itās out of budget.
I recall at one point Monzo trialled a BNPL type thing right? With an in feed card similar to Loans? I think it was short lived but this sounds like the resurgence of that.
Hope at least itās advertised responsibly 
Im wondering about S75 protection - Iām assuming itās not a thing with services like Klarna. Fingers crossed for a true credit card in time!
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Exactly. You look at Klarnaā homepage and itās āKlarna makes shopping easier, Klarna is the best shopping experienceā. The fact they are selling loans / credit products is deliberately hidden. They donāt mention finance, borrowing, interest rates at all there. Just āpay in threeā which they describe as the shopping experience you deserve.
I canāt see how this washes as a way to sell credit honestly
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Legally it must be surely they are providing credit as I understand it, the law isnāt specific to credit cards. I donāt know how they respond to S75 requests though.
They get payment from the merchant (because they are encouraging people to spend more money at their stores)
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My guess is that it would be option B with perhaps an interest free period. Maybe that period would be reserved for those paying for Plus/Premium, or perhaps they would have extended interest free periods compared to the standard account.
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From what I can see, Klarna pretty much operates to similar principles as most Payment service providers a la PayPal / Stripe etc:
Fees for e-commerce merchants (businesses):
Klarna charges merchants a set-up fee, monthly fee and a small percentage of each transaction. The details of these fees are dependent on the contract held with each business but are reported to be in the region of $600 for setting up fees, $90 per month and 1.5% ā 3% for each transaction. These fees are comparable to competitors Stripe and PayPal who charge 2.9% + $0.30 per transaction.
Obviously individual experiences and contracts will vary, but at the retailer end itās āin the same ballparkā as other payment systems.
So Klarna get a cut from every sale made via Klarna, and also any late fees + interest they get to claim. Obviously they assume the risk too.
Iād say thatās where the implementation of āencourage people to spend who might not buy outrightā comes in - if Klarna costs slightly more, or nets out as even with other payment providers, the benefit to using it is if you can convert consumers who wouldnāt have otherwise spent.
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I guess I mean āBallparkā looselyā¦
Stripeās range looks to be 1.5% - 3%
PayPal - 1.2% - 3%
Sum Up - 1.7%
Square - 1.75% - 2.9%
Klarna arenāt as transparent as anyone else I can google, but they say āUp to 3.99%ā for the āpay in instalmentā transactions - and Iām sure the rates are variable within that much like the other solutions are.
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This is a US story, but I fully expect this trend to occur here. The FCA are already looking at tightening the rules on BNPL in the UK.
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The retailer will pay the lender a fee - they will probably be quite happy to do so as they will sell a lot more.
Hi @AlanDoe perhaps we can close this topic in favour of that above from Simon or any āofficialā topic that follows tomorrow?