The Swedish Administrative Court of Appeal has imposed a fine of 7.5 million Swedish crowns (£650k) on buy-now-pay-later (BNPL) company, Klarna, for violating the EU’s GDPR.

BNPL companies allow customers to defer payment through staggered instalments on interest-free credit. The companies earn a profit by charging merchants a fee rather than consumers.

The court found that Klarna fell short of providing sufficient and transparent information to clients regarding the storage of their personal data.

The Swedish Authority for Privacy Protection initiated an investigation in March 2022, revealing that Klarna had not met GDPR requirements concerning informing users about the handling of their personal information.

Klarna attributed the issues to flaws in a privacy notice used from March to June 2020.

GDPR places restrictions on the transfer of personal data from Europe to countries outside the continent unless the receiving country guarantees an equivalent level of data protection.

Last year, Klarna reported its net operating income had increased 21% from the same period last year. However, the firm reported a net loss over the January-June period of $185m.

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As rampant inflation has seen interest rates soar, the BNPL model has struggled. Klarna’s market valuation fell from $46bn to $6.7bn in 2022, with competitors PayPal and Affirm also facing a share sell-off.

Klarna embarked on a cost-cutting mission in 2022, in the hopes of achieving a profit in late 2023, which involved laying off 10% of its workforce last year.