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Klarna Bank AB is turning over a smaller share of UK customers to debt collectors as the threat of late fees the company introduced last year prompts more of them to keep up with their bills. 
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Late fee introduction with a cap at 25% of the purchase value is reducing the number of UK and US customers reported to debt collectors by Klarna.
- BNPL customers sent for debt collection reduced to 0.84% from 1.95% in 2022.
- Late fees introduced in 2023 are having an impact
- A fee cap at 25% of order value (which seems a bit much) led to 55% payment on time
- In the US, the debt collection is down to 2.8%, a 180 bps improvement
There are two important considerations to keep in mind.
- Firstly, Klarna is preparing for an IPO in Q3 with a valuation of around $20B, and the quality of its on-time payments will help improve this quarter's results and the IPO prospectus.
- Secondly, it is worth noting that the markets are not regulated, and while there have been talks of market regulation in the UK, US, and other countries, it is unlikely that we will see any significant regulatory changes this year, especially with elections on the horizon.