Klarna, the Swedish “buy now, pay later” service, faces rising loan defaults even as its revenue and customer base grow. In its latest earnings report, Klarna said net losses doubled in the first quarter compared to last year. Consumer credit losses rose 17% year-over-year to $136 million. The report comes shortly after Klarna postponed its plans to go public, citing economic uncertainty and tariffs.
Across the broader BNPL industry, more borrowers are falling behind. A recent LendingTree survey found 41% of BNPL users reported making a late payment in the past year, up from 34%. The number of users relying on BNPL for groceries also rose, from 14% to 25%.
These trends are part of a larger pattern of financial stress in U.S. households. Consumer debt reached a record $18.2 trillion in the first quarter, according to the Federal Reserve Bank of New York. While credit card and auto loan balances fell after the holiday season, student loan delinquencies spiked from less than 1% to nearly 8% following renewed federal enforcement.
Despite these challenges, BNPL services are expanding. Klarna recently became Walmart’s exclusive BNPL provider and partnered with DoorDash in March, signaling continued growth in short-term lending for everyday purchases.
A Klarna spokesperson downplayed the jump in credit losses, noting that they rose only slightly as a percentage of total loan volume, from 0.51% to 0.54%.
At the same time, federal oversight is loosening. The Consumer Financial Protection Bureau recently dropped a rule treating BNPL companies like credit card lenders. The rollback follows leadership changes that make it easier to reverse prior policies.
Meanwhile, household spending remains high by historical standards, though growth has slowed slightly, especially among families earning under $100,000.
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