Klarna Payments Circumvent Gambling Blocks, Says Gamban Co-Founder

October 19, 2021
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Swedish fintech firm Klarna Bank has said customers cannot use any of its pay later or credit products to bet, but the co-founder of a gambling blocking software claims its direct bank transfer system circumvents personal account gambling payment blocks.

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Swedish fintech firm Klarna Bank has said customers cannot use any of its pay later or credit products to bet, but the co-founder of a gambling blocking software claims its direct bank transfer system circumvents personal account gambling payment blocks.

Matt Zarb-Cousin, Gamban co-founder and the director of Clean Up Gambling, said on social media he has received numerous emails from consumers questioning why betting sites were offering payments via Klarna.

“It appears this isn’t a ‘deposit now pay later’ [option] or payment in instalments, but a faster payment service, which circumvents transaction blocks,” Zarb-Cousin said.

Klarna is well known for its buy now, pay later services, but it also offers direct bank transfers.

Zarb-Cousin fears alternative payment methods such as Klarna and PayPal offer consumers a “workaround” via their direct bank transfers to avoid opt-in gambling transaction blocks offered by most UK personal bank accounts.

He called on the Gambling Commission to mandate that deposits online come only from debit cards as he believes “there is no reason for offering alternative payment methods other than to enable the circumvention of transaction blocks”.

Klarna responded directly to Zarb-Cousin on social media, saying it understands his concerns but added that “you cannot use any of our pay later or credit products for betting sites”.

“Klarna Direct Bank Transfer cannot circumvent these blocks and cannot be used on these sites if the customer or bank has the block on transactions in place,” Klarna added.

However, Zarb-Cousin called Klarna’s comments “untrue”.

He posted pictures of himself depositing cash on a Betway account using Sofort, which is the same online banking service as Klarna, despite having UK bank Monzo’s personal account gambling block switched on.

“The Klarna credit (spread losses/buy now pay later) function is not available for gambling transactions with Betway. Klarna is a bank transfer/debit method only when used in relation to our site,” Betway’s customer service support explained on Twitter.

The Gamban co-founder believes he was allowed to make the deposit as the transaction blocks relate to merchant codes, "but Klarna is via a bank transfer".

The debate on Twitter caught the attention of Labour MP Stella Creasy.

“It's quite clear on Betway that you can use Klarna for deposits. If you want to stop this Klarna rather than a tweet, why not block your product — after all, you're the one selling it as a service to the retailers,” Creasy said.

The Gambling Commission told VIXIO GamblingCompliance that it is not aware of any gambling operators it licenses that currently accept buy now, pay later as a payment option for customers within Great Britain.

“Any use of a ‘buy now, pay later’ service by a consumer for gambling would undoubtedly raise questions around their level of risk and affordability,” a spokesperson for the regulator said.

The Gambling Commission highlighted that licensees are required to have procedures for interacting with customers who may be at risk of harm and they must step in if any customer shows signs of problem gambling.

A ban on credit card payments in Great Britain was introduced last year.

Additionally, the regulator issued guidance to operators on how to prevent payments made through money service businesses (MSBs), which could be topped up by credit card deposits made directly into the MSB wallet.

Trade group the Betting and Gaming Council (BGC) declined to comment when asked by VIXIO GamblingCompliance whether or not its members accept Klarna as a form of payment.

Separately, Klarna announced it will be launching immediate payments in the UK on Monday (October 18), along with a host of other changes, including more robust credit and affordability checks.

The changes follow the UK government’s announcement in February that buy now, pay later credit agreements will be regulated by the Financial Conduct Authority (FCA) in order to protect consumers.

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