Klarna’s CEO Urges Trump to Go Further on Credit-Card Rate Cap

Core Viewpoint - Klarna's CEO, Sebastian Siemiatkowski, criticizes the credit card industry as exploitative, urging for more significant reforms to protect poorer borrowers [1][2]. Group 1: Industry Critique - Siemiatkowski highlights that credit card rewards result in a $15 billion annual transfer from poorer to wealthier individuals, with high FICO score consumers gaining $200 and subprime consumers losing $55 each year [2]. - He describes the current credit card system as a "regressive tax" rather than a financial product, emphasizing the need for reform [2]. Group 2: Proposed Changes - President Trump has called for a cap on interest rates at 10%, while Siemiatkowski suggests an even lower cap of 0% [3]. - Klarna has committed to adhering to regulations and typically charges customers at the lower end of the interest rate range, which spans from 0% to 35.99% [4][5]. Group 3: Company Performance - Klarna has experienced significant revenue growth, with a 139% increase in global volume and a 244% increase in the US for its "fair financing" loans over the past year [4]. - The company has expanded its offerings beyond buy-now-pay-later services to include its own credit card [4]. Group 4: Market Reactions - The potential changes in the credit card market have negatively impacted shares of traditional credit card providers [6]. - Analysts warn that proposed interest rate caps could severely diminish earnings from credit cards, potentially leading to reduced lending [6]. - If traditional credit card availability decreases due to these caps, it may enhance the appeal of buy-now-pay-later companies like Klarna and Affirm [7].