The UK’s advertising watchdog has banned an Instagram influencer campaign by Klarna for “irresponsibly” encouraging customers to use the “buy now, pay later” service to cheer themselves up during the pandemic.
The Swedish firm has taken online shopping by storm over the past couple of years and its model, which allows staggered payments for products with no fees or interest, has proved popular among millennials.
The company, which has more than 10 million customers in the UK – with an average age of 33 – ran a social media campaign on Facebook-owned Instagram in April and May using four influencers to encourage people to use Klarna to shop to “boost their mood”.
The influencers posted about clothes and “splurging” on skincare products during the lockdown while praising Klarna.
Klarna said the influencers’ posts were not irresponsible and that the the key theme was not about shopping but “taking care of one’s self during the Covid-19 lockdown period”.
It argued that the posts were about improving mental health and being entertained and did not infer that using Klarna “lightened one’s mood”. The influencers – Bradley Harper, Claire Menary, Aisha Master and Yasmin Fatollahy – each told the ASA that their posts were about the uplifting effects of products, not shopping with Klarna.
“We acknowledge that purchasing non-essential items was likely to be a source of comfort for some people during the national lockdown. However, each ad promoted the use of Klarna’s deferred payments services,” the ASA said.
“We concluded that in the context of the challenging circumstances caused by the lockdown at the time, including impacts on people’s financial and mental health, the ads irresponsibly encouraged the use of credit to improve people’s mood.”
Klarna’s model has proved popular, attracting more than 90 million users globally. It has more than 200,000 retailers on its books, including Asos, JD Sports and H&M in the UK.
In September, the company’s valuation exceeded $10bn (£7.48bn) making it the fourth-largest private fintech company in the world.
Klarna markets itself as a “healthier, simpler and smarter alternative to credit cards” as shoppers can spread the cost of purchases paying in instalments. However, critics say it encourages overspending, which could turn into a debt trap.
The Financial Conduct Authority is looking at operators in the “buy now, pay later” sector as part of a wider inquiry that began in September into the unsecured credit market.