The boss of pay-later giant Klarna has said he is surprised by concerns about the sector.
Chief executive and co-founder Sebastian Siemiatkowski told the BBC that comparisons with defunct payday lender Wonga upset him and described his company as “very different”.
Last month the Government announced that buy now, pay later (BNPL) credit agreements will be regulated by the Financial Conduct Authority (FCA) following a surge in shoppers turning to such products during the coronavirus pandemic.
Speaking to BBC Radio 5 Live’s Wake Up To Money programme, Mr Siemiatkowski said: “To me, it’s slightly surprising to see the concern with buy now, pay later.
“I’m emotionally upset when I hear comparisons to Wonga. Klarna is very different. We’ve been fighting the bank establishment for years.
“I’m surprised to see that there’s not a more positive response.”
He said the company has seen 100% growth year on year in the UK and 60%-70% growth worldwide, but admitted that mistakes had been made with some of Klarna’s advertising.
“We’ve identified that there’s been mistakes done. We have not always followed our own advertising principles and marketing principles.
“The increased interest in these products are something we obviously take to heart and have made that extra effort.”
BNPL agreements, provided by firms such as Klarna and Clearpay, allow shoppers to spread purchase costs interest-free at the checkout.
Options often appear on fashion websites and evidence suggests they are particularly popular with women and younger adults.
But they have been criticised for potentially encouraging people to spend more than they had planned and racking up debts they cannot comfortably pay back.
Klarna became Europe’s biggest private financial technology company towards the end of the last decade, beating Monzo and Transferwise to the top spot, with its BNPL model attracting around a million transactions a day.
But the Swedish giant has left a series of controversies in its wake as it sweeps across the world with a model that initially failed to capture imaginations.
By 2019 the business had faced several run-ins with authorities.
In his native Sweden, Mr Siemiatkowski was called in to meet the consumer rights minister, amid allegations that the company was unclear on how it handled personal data.
The Swedish government was also reported to have quizzed the chief executive on why so many customers are referred to the debt collection authority.
In the UK, the business allows customers to defer payments for up to 30 days. Shoppers provide their name, date of birth, mobile number, and billing and email addresses.
It allows customers to get the product and see it in real life, potentially returning it, before paying. Customers use it to buy the same product in different sizes before returning the items that do not fit.
These services have been reported as vulnerable to fraudsters, who can shop in someone’s name without them being charged for a month.
Customers have also complained that they have been sent reminders to pay, with fees, without being sent an invoice in the first place.
Today, Klarna is valued at around 11 billion dollars (£8 billion) following a 650 million US dollar (£475 million) investment round last year, led by private equity fund Silver Lake.
The sector is worth 1.5 billion dollars (£1.1 billion) globally, according to CB Insights, and is expected to play a major role in the future of the retail landscape.