Sweden-based fintech Klarna has announced starting a six-month pilot project with Germany-based private credit bureau Schufa so that people can shop online quickly with Buy Now Pay Later and be protected against over-indebtedness. Data provided by Schufa for credit checks will help with this aim.

In the past, inquiries from Klarna only had a small effect on individuals’ Schufa score, however, this effect on the score will be eliminated as part of the pilot project. The Schufa score is intended to provide information on how likely it is that users will pay their bills or loan installments on time. Schufa gets the data for this evaluation from the companies with which it works.

Both Klarna and Schufa will also check which credit data in the area of ​​invoice and installment purchases protect against over-indebtedness effectively and in compliance with data protection and which could be transmitted to Schufa. With this partnership, Klarna and Schufa aim to better protect German consumers from over-indebtedness. How does Klarna check solvency If users are over 18 and want to use Klarna at a retailer's checkout, Klarna will check users’ payment ability on every transaction to make sure they only give credit to those who can pay the fintech back.

On the one hand, Klarna uses internal data for this purpose. However, they also periodically make inquiries to credit reporting agencies such as Schufa to create a credit check within milliseconds. The use of Klarna is by no means guaranteed and the fintech can reject customers with insufficient creditworthiness.

The failure rate of this check is extremely low and in the first half of 2022, more than 99% of Klarna’s German customers paid the fintech back. How does Klarna work with Schufa? In order to check the solvency of their customers, Klarna carries out inquiries (so-called soft credit checks) at Schufa at certain intervals. In the past, these requests had a small impact on Klarna customers' Schufa scores.

The pilot project between Klarna and Schufa will, however, eliminate the effect on the Schufa score altogether. This means that the use of all Klarna products will no longer have consequences for users’ creditworthiness - with the exception of installment purchases, for which a so-called hard credit check is required. Schufa partnership with Greenomy Schufa began a partnership with ESG market infrastructure Greenomy in November 2022.

This partnership offers German banks and businesses a clear picture of how sustainable their operations are, and funds are then diverted to greener business ventures, accelerating the country's transition to a more sustainable future. .