It always struck me as especially odd that Klarna, a Swedish company, would be so adamant to not follow the common practice of using CBAs in Sweden. At least Tesla, who has also been in local news for refusing, has the excuse that they don’t sign them anywhere (although this excuse has never worked before, Sweden isn’t exactly devoid of foreign companies). It’ll be interesting to see how this affects the Tesla bargaining.
> It always struck me as especially odd that Klarna, a Swedish company, would be so adamant to not follow the common practice of using CBAs in Sweden
Up until 2020, Klarna used to run its own debt collection under the innocuous name Segoria. There is a video recording[1] of one of the founders saying that "the best customer is a customer that does not pay directly, but actually gets a reminder, and also a debt collection letter". That should say something about the mentality of the people running this company.
I thought that was the business model of all companies handling payments (like Klarna)? It's not as if any of them ever sends out a reminder until it is too late. I can't understand how that can be legal, but that is what everyone does (at least here in Sweden).
Yes it’s like a payday loan service for nonsense no one needs.
>Klarna also offers monthly financing, where you can pay for a purchase over a longer repayment period, ranging from six months to four years. These loans may charge interest up to 29.99% annual percentage rate (APR)
I found a good summary for how it works here. They even make money from the sellers apparently.
>The standard pricing for Pay in 3 / Pay in 30 / Pay now by card is 30p + 4.99% per transaction.
>If you take Financing (6-36 monthly payments), the rate varies from 5.99% to 16.99% if you offer your customer interest free option, but if you the Financing is interest-bearing, they charge you the same as the standard pricing above.
It's a bit more complicated than that, but yes: people are bad at calculating money and often switch to monthly part payments with huge interest rates.
It lets you spread the cost of things over several no-interest payments. It also offers a 'buy now pay in 30 days' facility. Again zero charge. Very useful if you're buying some clothes, some of which you might return quickly. In countries where people don't want, or need, credit cards it's a very useful alternative.
The main criticism is usually that it makes it very easy to get into debt. If you spread out non-essential purchases into multiple payments to shoulder them then you maybe shouldn't buy it in the first place.
>> If you spread out non-essential purchases into multiple payments to shoulder them then you maybe shouldn't buy it in the first place.
There's nothing wrong with managing your cash flow in this way provided you're not stretching yourself to the point where getting into debt is a possibility. There are plenty of expensive things I could buy now where I would rather spread the payment over a few months for better cash flow. Klarna is, in my opinion, very different from payday loan services. Payday loans are offering cash at very high interest rates, and the only people who need cash that badly are people struggling to pay rent/pay for some emergency. That's very predatory. Klarna is very different. Sure you could get into debt through it if your reckless, but it's much less predatory.
Typically BNPL companies like Klarna take a cut from the merchant as well. The idea is to increase volume for the merchant through psychological trickery, resulting in a net increase in profit even after the BNPL company's cut.
I mean that's just how credit works right? Either you pay a certain amount of interest or there are late fees. Payday loans you typically pay back the sum + a large (10+%) amount of interest even when borrowing for as little as one week and paying back on time. Hugely more predatory. They're seeking out people who need cash and have no other option.
paying up front when offered an interest free loan, especially in a high interest rate environment is not really rational though. i have excellent credit but klarna doesn't offer its services to me, i suspect because they expect i will make the payments on time and become unprofitable.
I suspect that whatever transaction Klarna did not offer its services to you during was an outlier.
Klarna is paid by the merchant when you select them as a payment method. They definitely want people with excellent credit, because people with excellent credit are low-risk.
Poverty, By America talks about companies like Klarna briefly. Poor people in the US are systematically shut out of a lot of credit channels that the rest of us take for granted. Klarna steps in to fill the void. It's an OK deal if you can pay on time, but if not then the interest skyrockets and you get a mark on your credit report.
> Economic security leads to better choices, not the other way around.
> Financial literacy training doesn't do anything if you're only offered bad deals.
If my assumption is correct that companies like Klarna are more commonly used by lower income people and we agree that poor people generally face a lot of exploitation, then it's super harsh to just write the users of these services off as "stupid people" or "finanically illiterate".
> Poor people in the US are systematically shut out of a lot of credit channels
Not credit cards. If you have a minimum wage job, you can easily get a Visa with a $600 credit limit to start. If you use it and pay the bill on time, they will double your credit limit in 6 months. Another 6 months with the same track record and you'll have a credit limit of many thousands of dollars.
And that's where a lot of people get trapped: they buy more than they can pay off 100% each month. Credit card companies love that because they collect interest.
But if you can manage your desires and wants, you won't get shut out of credit even with a minimum-wage job.
> If my assumption is correct that companies like Klarna are more commonly used by lower income people and we agree that poor people generally face a lot of exploitation
I can agree with the former but not the latter. I know someone who lives in a mobile home, does not have a high income, yet felt the need to drive a Mercedes because he can "afford $800 a month". We all know people like this; just swap Mercedes for a F-250 Tremor or whatever.
I mean, I guess you could call it exploitation for some loose definition of the term, but that removes a lot of agency from such people. It's a supremely bad financial decision, perhaps facilitated by car salesmen seeking commissions, but at the end of the day nobody held a gun to their heads to sign on the dotted line.
As an immigrant, one thing that really struck me about the broader American culture was that so many people had no interest in saving and frugality. I don't think it's accurate to say that "society" somehow "exploits" people into spending money they don't have in cases like Klarna or buy-here-pay-here car lots.
I mean, if someone lives in a coal town where the only job is to mine coal and the employer doesn't even provide PPE, then you could call that exploitative. People using credit to buy things they don't need and can't afford, that's something else.
Agree. I dated a woman once who was a waitress at Applebees (a chain diner/restaurant). She told me she was buying a loaded F-150 Ford pickup in a year whether or not she could afford it. Why? "Because I deserve it." This attitude sinks people financially, for decades if not life.
Your argument seems to rest on the crux of an anecdote. This one person I know who lives in a mobile home bought a Mercedes, therefore they all are probably making indefensible decisions like that. But again I'll mention this idea from the book again because I think there's a profound truth here:
> Economic security leads to better choices, not the other way around.
I can pull up a bunch of examples of exploitation from the book if you're curious to hear more. The other one that comes to mind is overdraft fees of banks. They don't need to be as high as they currently are and they might not even need to exist at all. Other countries already cap them at much more reasonable percentages.
> People using credit to buy things they don't need and can't afford, that's something else.
You're making a lot of assumptions here. Here's a simple counterexample using the concert ticket example that someone else mentioned. A poor person buys concert tickets. They get behind on payments and it damages their credit score. Unnecessary purchase? Maybe. Maybe not. What if it was a single mom who had bought the concert tickets for her teenage boy's birthday to distract him from the shooting that he had witnessed on his street? Might sound like an extreme example, but if you can consider for a moment that it's not, then you can see how it changes the whole discussion significantly. I can say for a fact that my mom never splurged on herself during the years she raised my brother and me on her own, but she racked up major credit card debt by buying us Christmas presents, because she felt guilty about having to work all the time and wanted us to have amazing Christmas experiences.
Not sure if that's a good argument, my father loves the smell of diesel exhaust for some reason, doesn't make it right to try to coax 'em into breathing it.
Klarna is quite nice when you order something that won't ship until (much) later, you can delay paying until you have received your products.
It's also nice when you buy from a new store that you might not really trust yet. The fact that a store offers Klarna is somewhat of a quality stamp as well, so that in itself probably suffices and you don't really need to use their credit line when ordering.
They also remind you when your bill is due so you don't end up paying any unnecessary fees.
I don't understand this thing about new companies coming in and making it so much easier to shop. It used to be easy. Now it takes effort to buy things. I used to just select invoice payment. The invoice ends up with my bank directly without being mailed to me. I click a checkmark in front of all invoices I want to pay. I click pay and enter the code from my code-box. The money gets payed one day before the pay before date automatically. It doesn't even matter how many invoices there is, just one click to pay them all. On the right date. It doesn't get easier than that. And then these new rentseeking companies comes along and want to "improve" this workflow to get in on the action.
The financially literate love it too. 12 months interest free while inflations is already in the single digits and high-yield savings accounts are returning 4+ percent? Sign me up, as you basically get a discount on the things you already want to buy.
I'm not sure about that but because it's interest free, it is very useful for those who are financially literate, as you can get 4+% in a high yield savings account all the while inflation is above that figure, so you are basically getting a discount on what you'd want to buy anyway.
BNPL is a behavioral economics hack to convince young cohorts to spend when they don’t have purchasing power. It’s payday lending masquerading as consumer benefit.
If you can’t afford something, be wary when someone says “no worries, you can borrow to pay for it.”
Yeah maybe you don't need a payment plan for concert tickets but maybe you need one for a wheel chair, a laptop you need for school or any other emergency
I would be surprised if the percentage of goods people actually need financed by Klarna exceeds one percent. It's mostly fashion and luxuries.
Klarna is not a charity. Its whole business model is that a certain percentage of loans taken out will not be paid back in time because a lot of people suck at comprehending their financial situation, and that's where they make their profit.
not quite. They also charge the sellers. The theory here is that paying in installments is more attractive to buyers (rationally or not) so it increases sales.
Though I don't know how much of their profit is from that vs. interest.
Turns out it has never been the end of the world for these haughty companies to just sign a CBA. The people running them just revel in acting like assholes.
I think a CBA could make sense for Klarna, but not necessarily for Spotify.
Separately: A company with a CBA is a red flag to me. I think that CBAs and unions is what have kept tech salaries artificially low here, compared to e.g. US tech salaries.
You are free to work for companies without a CBA in Sweden, such as most companies under 20 employees.
However I have seen way too many of my developer peers fall for this ”CBA bad” plot. The result is often bad total compensation where e.g. pensions is not nearly as good as with a CBA. There are of course exceptions, but you really have to do your homework.
If you want higher compensation in Sweden you probably want to be a standout performer early in your career. Then once you’ve built a good network you can pivot to running your own consultancy business and charge good rates.
It is also not impossible to get local employment at a company with presence in the US and eventually transfer there and get that high US tech salary. (But you might be in for a surprise what the cost of living actually is in the US, especially if you need healthcare or daycare and education for any kids.)
Finally tech salaries can be pretty good in Sweden if you provide good value to your employer, can argue for that, and is ready to jump ship every now and then.
What I believe keeps salaries low at some workplaces in Sweden is our reluctance to talk and compare our compensation with our peers. There are many devs here that provide good value yet does not know their market rate.
Where does the money in tech companies in Europe go? In the US, despite tech being one of the best paying working class jobs, the execs, shareholders etc make a significantly more amount of money than the workers.
How much profit/revenue does the average engineer in Klarna bring vs, say square in the US?
