‘Buy now, pay later’ company Klarna aims to return to profit by the summer of 2023.
Jakub Porzycki | NurPhoto | Getty Images
Klarna has agreed a major new distribution partnership with fellow fintech unicorn Stripe, in a bid to expand its reach and add more sellers ahead of its upcoming US listing.
Klarna’s buy now, pay later (BNPL) service will become available as a payment option for merchants using Stripe’s payment methods in 26 countries, the two companies told CNBC on Tuesday.
This isn’t the first time Klarna and Stripe have collaborated. In 2021, at the height of the Covid-19 pandemic-induced fintech craze, Stripe announced that Klarna would offer its BNPL plans to the US company’s merchants.
BNPL plans are installment loans that allow a consumer to purchase something online or in-store and then pay off their debt either at a later date or over a period of equal monthly installments. BNPL schemes have become a popular way for people to spread the costs of everyday purchases.
The new partnership with Stripe gives Klarna a major boost at a time when it is gearing up for a highly anticipated IPO. Klarna confidentially filed for an initial public offering in the United States in November. According to an American newspaper, the company could fetch a valuation of as much as $20 billion Bloomberg News report last year.
Klarna makes money from the fees retailers pay for every transaction processed through its platform. In exchange for making Klarna visible as a payment option in the payment tools, Stripe gets a share of the money that Klarna makes from a given transaction.
Klarna declined to disclose the financial terms of the deal with Stripe.
“This is really important for Klarna,” David Sykes, Klarna’s Chief Commercial Officer, told CNBC. He added 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 have added 100,000 new merchants by 2024 and we are already seeing the growth rate increase with this agreement.” he added.
Analysts recently valued Klarna, which was founded in 2005, at a range of $15 billion. At its height during the pandemic-driven surge in fintech stocks, the company attracted a $46 billion valuation in 2021 in a funding round led by SoftBank’s Vision Fund 2.
In 2022, Klarna took an 85% haircut in a new funding round that valued the company at $6.7 billion.
The deal also has the potential to generate additional revenue gains for Stripe.
BNPL advocates tout these plans as a way to increase overall transactions because shoppers can purchase more items in a shorter period of time and then pay them off over a longer period of time.
A study conducted by Stripe last year found that companies that offered BNPL as a payment method generated up to 14% more revenue due to higher conversions and higher average order values.
“We saw BNPL volume grow 172% on Stripe last year, which is much faster than other mainstream payment methods,” Stripe chief business officer Jeanne Grosser told CNBC, adding that the deal with Klarna was a “win win situation”. “For both companies.
There has long been speculation that Stripe is a near-term IPO candidate. However, the company says it is in no rush. The company, also a victim of a decline in fintech valuations, cut its valuation from $95 billion in 2021 to $50 billion in 2023. reportedly recovered to $70 billion as part of a secondary stock sale.