On Wednesday, Klarna announced the launch of a physical card in the US that will let shoppers use its buy now, pay later services almost anywhere they shop.
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The Swedish fintech is looking to rebound from recent layoffs and reports of a potential down round.
Klarna CEO Sebastian Siemiatkowski has said that the company plans to focus more on existing users.
Swedish buy now, pay later fintech Klarna is expanding its offerings in the US even further with a new physical card that will allow customers to use the BNPL service almost anywhere they shop, Insider can exclusively report.
Shoppers will be able to use the card, which launched Wednesday, anywhere Visa cards are accepted. Customers can split their purchases into four interest-free installments, which are paid off via biweekly statements available in the Klarna app.
“By putting the Klarna experience that consumers know and love in their pockets, we increase the ubiquity of our offering in consumers’ lives,” David Fock, Klarna’s chief product officer, told Insider via email.
Klarna said that over one million customers in the US had signed up for the card’s waitlist since late February. The company also said that it expected the card’s launch to be even stronger than the January launch of a similar card product in the UK, where over 300,000 cardholders joined in the first month after the launch.
The card is free to use for the first 12 months, costing $3.99 a month after the first year.
The card’s launch may provide a boost for Klarna’s business as macro factors such as rising interest rates and mounting inflation cast doubts across the market and have led to layoffs and hiring freezes at fintechs.
The Wall Street Journal first reported in mid-May that Klarna was attempting to raise new funds at a valuation that was almost a third less than the $45.6 billion figure it was valued at around a year ago. The BNPL giant was targeting a valuation over $50 billion earlier this year, according to the WSJ, but potential investors had backed off due to concerns about the state of the market.
On May 23, Klarna’s CEO Sebastian Siemiatkowski announced to employees that the company would lay off around 10% of its staff, citing the war in Ukraine, rising inflation,
in the stock market, and an impending
as key reasons for the cuts in a memo sent to employees.
“When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today.” Siemiatkowski wrote.
In a May 26 article in the Financial Times, Siemiatkowski said that he was “not convinced” by the reports that Klarna would need to raise funds at a lower valuation. Meanwhile, an investor told the FT they expected the company’s valuation could be cut by as much as 50%.
Klarna isn’t the only BNPL player to stumble recently — Affirm has seen its stock price fall nearly 70% this year, despite a stronger-than-expected earnings release earlier this month. After BNPL provider Zip announced plans in February to acquire competitor Sezzle for $356 million, shares of both companies, which are listed on the Australian stock exchange, have slumped.
Bringing buy now, pay later offline
Klarna’s US card launch arrives at a time when many buy now, pay later providers are diversifying their offerings, attempting to increase customer loyalty and make their platforms a go-to place for shopping and discovery.
In the interview with the FT, Siemiatkowski also said the company would double down on growth in the United States, but would do so by focusing on existing customers rather than new users. The card could be a helpful tool for deepening engagement: the company said that cardholders in Sweden and Germany have a higher purchase frequency and are more loyal consumers than non-cardholders.
The launch of BNPL cards is part of a larger shift in providers’ strategies. With the use of cards, providers no longer have to rely on cutting deals with individual retailers and can accelerate their push to bring BNPL offline.
Affirm’s Debit+ card allows shoppers the option to split purchases over $100 into four interest-free payments, and UK-based fintech Zilch uses a virtual Mastercard to offer customers the choice between paying in full and using BNPL wherever they shop. Zilch launched in the United States earlier this month and counts more than 2.5 million users in its home country.
Klarna recently announced a deal with Brookfield Properties to bring its BNPL services to retailers like H&M, Sephora, and Abercrombie & Fitch in over 150 US malls, but it isn’t the only player bringing its services offline.
Afterpay is now available as a payment option online for Square sellers, after the acquisition of Afterpay by Block, Square’s parent company, closed in late January. Square sellers in the US and Australia are now able to offer Afterpay as an in-person payment option as well.
Klarna’s card intensifies the super app race, as providers aim to become users’ primary financial and shopping destinations
The card’s launch also intensifies the race to build a financial super app in the US. Super apps bring multiple digital activities that would normally occur across several apps — like banking, budgeting, shopping, and stock and crypto trading together — in one place.
In tandem with the card launch, Klarna announced the release of its Financial Overview dashboard in its app. The feature will allow users to set a monthly spending allowance, view categorized spending breakdowns, and track spending history and patterns over time.
“Klarna is already far more than just a payment provider,” Fock said. ‘It’s a financial companion for consumers with the promise to help them save time and money whenever and wherever they shop and take active control over their finances.”
David Fock is the chief product officer at Klarna.
The dashboard feature adds more capability to the revamped app Klarna first revealed in November, allowing users to shop anywhere with Klarna through the app’s browser and use new features, including budgeting tools, delivery tracking, and return management. The company has said it plans to develop other features for the app like loyalty programs, social features such as livestream shopping events, and product data including price history, reviews, and store availability. Klarna markets the app as “the only shopping app consumers need.”
Other BNPL providers are hot on Klarna’s heels, however. Block executives detailed their plans to use Afterpay to help transform Cash App into a super app by enhancing its shopping features at an investor presentation earlier this month.
BNPL players’ push to diversify comes as their core offering gets commoditized by larger financial firms.
At a recent investor event, JPMorgan Chase announced plans to launch a “Pay in 4” installment lending tool that will allow
customers to split up their payments wherever their Chase debit cards are accepted.
“We may not be a first mover in buy now, pay later, but we have the full suite of payment lending and commerce capabilities,” said Marianne Lake, JP Morgan’s co-CEO of consumer and community banking, at an industry conference last year. “Over the longer term, I think that’s the bigger picture.”
Legacy players from other parts of the payments industry want in on the BNPL game as well. Bread Financial, formerly known as Alliance Data Systems, helped pioneer the store credit card model when it was founded nearly 40 years ago. Following its acquisition of the fintech Bread in 2020, the company invested $1 billion in its digital capabilities, including the development of white-label BNPL and lending options retailers can offer customers.
Bread CEO Ralph Andretta told Insider earlier this year that he thinks Bread’s history as a public company gives it an edge over newer players.
“They’ve never been through a downturn. They’ve never been through a bad economy,” Andretta said of his fintech competitors. “We know how to manage through a recession. We know how to manage through good times. We know how to manage regulation. Those are things that the startups have to learn, and it’s expensive and it takes your mind off the marketplace.”