In April 2020, as the UK entered its first full month of COVID-19 lockdown restrictions, 31-year-old blogger and author Clare Seal was scrolling through Twitter when she saw something that she said left her "gobsmacked".
An ad stated that for every order made using Klarna on fashion retail site ASOS, the popular Swedish financial service would make a donation to the International Committee of the Red Cross. Klarna allows consumers to "buy now, pay later," offering financial options such as "pay in three" where the payments are split across three months, and "pay later" which delays payment by 30 days.
Seal runs "My Frugal Year," the blog and Instagram account she started when faced with £27,000 ($37,198) of debt in 2019 where she chronicled her effort to get out of the red.
As someone with a close understanding of consumer debt, Seal said she found Klarna's promotion with ASOS to be "cruel," leading her to tweet: "At a time when financial insecurity is reigning supreme for many and the ability to fulfil the 'pay later' part of the BNPL bargain is shaky at best, this seems like irresponsible marketing at best, dangerous manipulation at worst."
—Clare Seal (@claremseal) April 29, 2020
The UK's Advertising Standards Authority (ASA) had also taken notice of Klarna's social media marketing.
In December 2020 the ASA ruled that four influencer advertisements Klarna ran between April and May 2020 were "irresponsible" for encouraging the purchase of beauty or clothing items to help with "lifting" or "boosting" consumer moods during lockdown.
The ads were particularly onerous given that they ran at a time "when many people were experiencing difficult circumstances and isolation during the lockdown, including financial concerns and mental health problems," the ASA said in its ruling.
Klarna responded at the time by stating that it supported more clarity in the space. "This is frankly a bigger topic than us," the company said.
Behind the scenes, Klarna had already begun reaching out to industry professionals and those linked to the influencer space to gauge their interest in joining a yet-to-be-created "influencer council."
Since Klarna first launched in the US and UK in 2015, the company has become a leader in the "buy now, pay later" space. Klarna's competitors include Clearpay, Paypal Credit, LayBuy, Openpay, and ZipPay. Use of buy-now-pay-later services at checkout tripled in the UK in 2020, as the pandemic drove shoppers online, according to the UK's Financial Conduct Authority. After taking on $1 billion in new funding last month, Klarna's valuation tripled to $31 billion 2021, making it Europe's most valuable private startup.
Now Klarna is looking to use its heft in the space to set an example for other financial services brands looking to partner with influencers. The hope is that the council's work will encourage the sector to be more responsible and transparent in its marketing. Insider spoke to four members of Klarna's influencer council to find out how the effort is going so far.
Klarna's influencer council is focused on making marketing in the financial services space more responsible
Announced in March of this year, the Klarna influencer council has brought together 10 industry experts — including PrettyLittleThing marketing director Nicki Capstick and influencer Amelia Liana — who have been tasked with creating a "toolkit" and whitepaper on the topic of responsible marketing practices in the financial services sector.
Klarna has said that its main aim for the council was to attempt to provide greater clarity on the current guidelines for brands and influencers working with financial services companies in the UK.
The council is initially sitting for five sessions across 10 weeks, for an hour and a half each time. Meetings take place virtually with chairperson, TV presenter and social media expert Christian Howes, leading the council each week.
Discussions about starting the council began in September 2020, Klarna UK marketing chief AJ Coyne told Insider. The move came at a time when Klarna knew it was under ASA investigation, but didn't yet know whether the complaint would be upheld. While Klarna had hoped to also recruit a representative from a media company and a government representative, Coyne said, "We felt we had enough to get moving" in March.
Seal first heard from Klarna in December 2020, and said she was initially shocked when Klarna contacted her.
"My initial reaction was to say no," she said. "But actually I was really impressed that they wanted to have this discussion and they weren't only inviting the kind of people who are going to be nodding in agreement."
Psychotherapist and author Owen O'Kane told Insider he joined the influencer council to be an "advocate for mental health issues that may arise" when discussing the impact of social media and debt.
"You can't assume everyone is operating from a functional place," he said. "We have to assume that some people might struggle making decisions and later regret them."
The council is beginning to draft its marketing toolkit
Klarna's influencer council is now on its third session and is beginning to draft a marketing "toolkit". Coyne said the council wants to implement more explicit guidelines for influencers when posting paid advertisements on social media — avoiding nontransparent practices such as simply having "white text saying "#ad" on a post," he added.
The council has also been studying exactly how the ASA applies its influencer marketing advertising rules and how it investigates complaints, under the guidance of Rupa Shah, founder and director of Hashtag Ad Consulting. Shah previously worked for the ASA and Committee of Advertising Practice, which writes the advertising codes the ASA applies.
In March 2021, the ASA released a report declaring the "widespread failure of influencers to disclose advertising" after monitoring 122 Instagram influencer accounts across three weeks in September 2020. Of the 24,000 Instagram posts reviewed, the ASA found widespread inconsistent advertising disclosure. Nearly a quarter of the posts monitored were ads, but only 35% made correct disclosures.
The ASA has been invited to the council's fourth session, and has offered to support in reviewing the council's draft guidelines.
Matt Wilson, media and public affairs manager at the ASA, told Insider: "We welcome any initiative that aims to help drive standards in advertising including through establishing a council to provide influencers with further clarity on how to avoid misleading consumers."
Klarna has also made plans for the council to sit in September 2021 to review its initial guidelines as influencer marketing trends evolve.
"Platforms change so quickly that we need to continually meet every four months to come back and assess what's changed and what's missing," Coyne told Insider. "TikTok erupted a year ago, something else might erupt with a new format soon and we do need to tackle that and deliver assets to help."
Mandeep Nijjer, CEO of influencer marketing agency Red Media Live, welcomed Klarna taking a "big stand" in setting up its influencer marketing council. But for wider industry impact she said she would like to see the entire community of "buy now, pay later" financial services working on guidelines together, rather than Klarna attempting to lead the charge alone. (Nijjer is not involved with Klarna's influencer council.)
Coyne's ambitions for the council extend beyond Klarna and even the financial services space.
"What we hope to achieve, selfishly, is that Klarna will adopt it and every brand should be adopting something similar," he said.
Meet the Klarna influencer council:
- Christian Howes, data and analytics lead and broadcaster (Chairman)
- Nicki Capstick, marketing director, PrettyLittleThing
- Clare Seal, creator of My Frugal Year, founder of The Financial Wellbeing Forum and author
- Rupa Shah, founder and director of Hashtag Ad Consulting
- Joel Gladwin, head of policy at Coadec
- Kia Commodore, founder of financial literacy platform, Pennies To Pounds
- Amelia Liana, YouTuber and blogger
- Owen O'Kane, Psychotherapist, author and former clinical lead for an NHS mental health service
- Lian Hirst, founder of PR and digital agency TRACE Publicity
- AJ Coyne, head of UK marketing, Klarna