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Klarna, which is ranked as the world’s top provider of Buy Now Pay Later services in April 2022, is now offering a “pay in 30” days option in addition to “pay in four” installments. The company plans to become an open banking player by broadening its BNPL offerings. While it has already established its presence in the United States as a renowned Buy Now Pay Later giant in e-commerce, the company is planning to expand its presence with the “Pay Now” option. This strategy is due to the stringent regulations and growing scrutiny of the BNPL industry. In 2021, Klarna was one of the fintech companies that underwent study by the Consumer Financial Protection Bureau in the United Kingdom and the United States.
At the same time, the company started offering Pay now an option in the United States in November 2021. Pay now is an option that users can pay on the day of purchase made through the Klarna app, which is the opposite of the BNPL service. After the purchase, consumers can pay immediately at any retailer where Klarna is available or choose to pay now or later with the same seamless payment experience. While finalizing the transaction for the “Pay Now” service, the app uses a bank credit or debit card associated with the customer. The major difference in the “Pay Now” service from other Klarna transactions is that funds for the purchase come from a connected debit or credit card rather than any BNPL company. Consumers will get reward points in Klarna’s vibe programs for each transaction and can utilize the company’s user experience. For Klarna, it provides an opportunity for the company to strengthen open banking.
Klarna acquired the payments company Sofort in 2014, which means “pay right away.” With this acquisition, Klarna now owns the world’s largest account-to-account-based payment infrastructure by creating unique and cost-efficient alternatives to the existing payment network. According to the company’s Annual Report 2021, the Pay Now option today represents 40% of transaction volumes and is projected to increase the share in physical stores to nearly 90%. The main aim of Klarna expanding the Pay Now option is ensuring consumers first pay with the money they have rather than taking credit or loans. The company believes that consumers are not interested in paying interest, especially high-credit interest imposed by some credit card companies, banks, or BNPL providers.
In February 2022, the company opened a waitlist for new US Klarna cards issued by WebBank. This represents the physical card access for Klarna’s pay in four plans. More than 500,000 had signed up on the Klarna app, and the US accounted for the highest share of app downloads within days of opening the waitlist. Similar demand can be expected if the company expands its physical card services for Pay Now option.
As per the company’s annual report, though online retail is a fast-growing channel, around 72% of US retail sales are expected to occur in stores in 2024. In 2020, only 4% of offline sales involved BNPL services, leaving significant growth opportunities for other services. The company is also involved in significant deals with major mall companies in which merchants will accept Klarna payment options in-store. These partnerships can bring approximately 2 billion potential Klarna plan users. Offering Pay Now option can attract users who are not interested in making transactions with the BNPL service. The company is also planning to expand its Klarna card and Pay Now services to further markets in the near future.
To know more and gain a deeper understanding of the BNPL market in the United States, click here.
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