Klarna strikes new partnerships as credit card competition looms

The news: The Sweden-based buy now, pay later (BNPL) giant bolstered its global presence with new partnerships amid its aggressive growth push.

• Commonwealth Bank of Australia (CBA). Through the partnership, any of CBA’s 10 million retail merchants that integrate with Klarna will pay no merchant fees for their first six months. Eligible merchants will also get marketing support from Klarna during this period. This partnership is a huge opportunity for Klarna—which first entered Australia’s robust BNPL market in January 2020—and should help expand its retail network.
• Yoox Net-a-Porter. The tie-up lets customers purchase the company’s luxury clothing and accessories in three or four installments. And with 4.5 million customers in 180 countries across four brands, the partnership can give a substantial boost to Klarna’s global volume. Klarna recently secured a number of retail partnerships, like the tie-up with Petco announced last week, helping attract new users with expanded availability.

The bigger picture: Klarna’s aggressive expansion is fueled by gangbuster funding rounds.

Klarna bagged $693 million to bolster its US footprint in June, on top of a $1 billion raise in March. It used those funds to acquire three companies in July alone. All that activity is paying off: Klarna is expected to hold 48.6% of US BNPL market share by the end of this year, according to our forecasts. And in Q1 2021, Klarna reported global merchandise volume (GMV) of $18.9 billion, up from $9.9 billion in Q1 2020. $6.9 billion came in March 2021—a monthly record for the company.

The challenge: Competition threatens the growth of BNPL providers as legacy payment players try to reclaim customers.

Citi will launch a BNPL product in Australia in October, and Visa plans to launch its own product in the US in “the coming weeks and months.” Canada’s Scotiabank just debuted a BNPL installment offering that lets credit cardholders convert payments into BNPL plans.

These offerings could chip away at Klarna’s growth and make it harder for the provider to keep its impressive market share. But Klarna is likely banking on its ambitions of becoming a super app that’s home to shopping and financial services to keep its user base and fend off competitors by tying customers tightly to the company.