“Buy now, pay later” company Klarna aims to return to profit by the summer of 2023.
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Klarna has agreed a major new distribution partnership with fellow fintech unicorn Stripe, in a bid to expand its reach and add more merchants ahead of its upcoming US listing
Klarn’s buy-now-pay-later (BNPL) service will become available as a payment option for merchants using Stripe’s payment tools in 26 countries, the two companies told CNBC on Tuesday.
This is not the first time that Klarna and Stripe cooperate. 2021, at the peak Fintech frenzy fueled by the Covid-19 pandemicStripe has announced that Klarna will offer its BNPL plans to the US company’s merchants.
BNPL plans are installment loans that allow a consumer to buy something online or in a store and then pay off their debt, either later or over a period of equal monthly installments. BNPL arrangements have become a popular way for people to spread the cost of everyday purchases.
The new tie-up with Stripe gives Klarna a big boost as it prepares for an eagerly awaited initial public offering. Klarna confidentially filed for an IPO in the United States in November. The company could reach a valuation of as much as $20 billion, according to a Bloomberg news report last year.
Klarna makes money from the fees merchants pay for each transaction processed through its platform. In exchange for the visibility of Klarna as a payment option in its billing tools, Stripe will receive a portion of the money Klarna earns from a particular transaction.
Klarna declined to disclose the financial terms of its deal with Stripe.
“This is really significant for Klarna,” David Sykes, Klarna’s chief commercial officer, told CNBC, adding that the company has already doubled the number of new merchants in the three months since it began implementing the new integration with Stripe in October.
“We’ve added 100,000 new merchants in 2024 and we’re already seeing an increase in our growth rate with this deal.” he added.
Analysts recently valued Klarna, which was founded in 2005, in the range of $15 billion. At its peak during the pandemic-induced boom in fintech stocks, the company attracted estimated at 46 billion dollars in a financing round led by SoftBank’s Vision Fund 2 back in 2021.
In 2022, Klarna took an 85% stake in a new funding round that valued the company at $6.7 billion.
The deal also has the potential to boost revenue for Stripe.
BNPL advocates laud these plans as a way to increase the overall level of transactions, as customers can purchase more items over a shorter time frame and then pay them off over a longer time frame.
A study conducted by Stripe last year showed that companies offering BNPL as a payment method generated up to 14% more revenue from increased conversion and higher average order values.
“We saw 172% growth for BNPL last year on Stripe, which is much faster than other mainstream payment methods,” Jeanne Grosser, Stripe’s chief business officer, told CNBC, adding that the deal with Klarna was “a win-win “. “for both companies.
Stripe has long been speculated to be a candidate for an imminent IPO — however, for its part, the company says it’s in no rush. The company, also a victim of the fintech slump, cut its valuation to 50 billion dollars in 2023 from 95 billion dollars in 2021. Company valuation allegedly jumped to $70 billion, as part of a secondary sale of shares.
