By Gianluca Lo Nostro and Jakob Van Calster

(Reuters) - The Dutch government is seeking to prevent the rollout of "buy now, pay later" services in physical retail outlets due to the financial risks they pose for consumers, according to a letter sent by Finance Minister Eelco Heinen to parliament on Tuesday.

"Buy now, pay later" (BNPL) schemes surged in popularity for online purchases since the COVID-19 pandemic and allows consumers to split payments over time into smaller, interest-free installments.

These loans are often provided by digital lenders such as Sweden's Klarna.

Although an outright ban would be "unfeasible" because of EU regulations, the Dutch government believes that BNPL services can trigger earlier and larger debts, particularly among younger consumers, Heinen said in the letter, co-signed with the Minister for Legal Protection Teun Struycken.

The government urged Klarna to refrain from further expanding its BNPL services in physical stores in the Netherlands, according to the letter.

Klarna could not be immediately reached for comment.

Meanwhile, the Dutch government has held discussions with other BNPL providers, including Zalando and Amazon. Unlike Klarna, these companies have not yet signed a code of conduct requiring them to verify the age of all customers.

Last September, Dutch payments group Adyen struck a deal with Klarna to extend their existing partnership to in-store terminals in Europe, North America and Australia.

However, a spokesperson for Adyen told Reuters on Wednesday that when Klarna announced its BNPL expansion, it was still in the pilot phase in some countries and had not been launched in the Netherlands.

(Reporting by Gianluca Lo Nostro and Jakob Van Calster; Additional reporting by Supantha Mukherjee; Editing by Bernadette Baum)