Affirm on Thursday sprang to action to explain the loss of Walmart's buy now/pay later business to rival Klarna, a move that demonstrates the importance of the retail giant to the hypercompetitive buy now/pay later industry.
"It looks like an attempt [by Klarna] to gain some IPO marketing," said Michael Linford, Affirm's chief operating officer, during a William Blair-hosted webinar.
Klarna said on Monday that it is partnering with consumer finance app OnePay, which is tied to Walmart's fintech unit, to offer buy now/pay later loans at store locations in the U.S.
Klarna made the announcement shortly after making its
Affirm's stock fell about 10% Monday after the Walmart announcement but has since recovered.
Klarna could gain access to millions of potential consumers by partnering with Walmart, a key win for the company given that consumers are more loyal to
"It's significant that a non-U.S. company could get the
"Walmart gives Klarna market penetration in the U.S. to go after other large retailers," Carmel told American Banker.
Who's Klarna?
Analysts have long said Klarna's challenges in the U.S. include overcoming a branding gap between the Swedish company and more recognizable American payment companies.
Nabbing Walmart helps Klarna's position, Carmel said.
It could also boost Klarna's valuation, estimated at $15 billion, as it lists its shares in a difficult economic and political environment. Atholl Simpson, a senior analyst at Mergermarket, said Klarna's IPO conditions are more challenging than when Affirm went public in 2021.
A successful listing would be a sign of validation for a sector that continues to face macro headwinds and regulatory scrutiny. It would also pave the way for other fintech and payment firms to start prepping their own IPOs, Simpson told American Banker.
On Thursday, Affirm's Linford said it's a "mistake" to place the Walmart/Klarna deal into a larger context about Klarna and Affirm's rivalry. "This is a very specific situation," he said.
Affirm was in talks with Walmart, and the announced deal with Klarna was "not a surprise," Linford said.
"Walmart wasn't super material economically to the business," Linford said. "As we ramped up with Amazon and Shopify [other Affirm partners] Walmart became a much smaller part of our business."
Walmart did not comment. Klarna referred questions to a press release quote: "This is a game changer," said Sebastian Siemiatkowski, co-founder and CEO of Klarna. "Millions of people in the U.S. shop at Walmart every day."
For large enterprise clients, it's difficult to support a BNPL model that is focused on approving as many consumers as possible while offering competitive credit products to the consumer and making the product attractive to the capital markets, Linford said.
"[Walmart] is a tough merchant to serve. It's a tough technology integration," he said.
A big market
The most popular BNPL app downloads in the U.S. are Affirm and Block subsidiary Afterpay, each with about 2.4 million downloads in the fourth quarter of 2023, according to
BNPL lenders are chasing a large and fast growing market. BNPL accounted for 5% of global e-commerce value in 2024, reaching an estimated $342 billion, up from just $2.3 billion in 2014, according to research from payments processor Worldpay. And 38% of financial institutions say debt alternatives including BNPL will drive investment in the coming year, according to research from Arizent, American Banker's publisher.
In an analyst note, William Blair said the competitive risk posed by Klarna's Walmart announcement is "overstated."
"We accordingly argue that most merchants will put higher conversion and better unit economics above price," the note said. "This favors Affirm's interest-bearing, tech-centric model, in our view."
Additionally, the Klarna/Walmart deal is not fully exclusive and is limited to OnePay-Walmart's fintech app.
During the Affirm webinar, Linford said it's his understanding that Walmart wants OnePay to "own" Walmart checkout, though the pace of that migration is uncertain, noting Affirm still has a contract with Walmart and the Klarna deal is U.S.-focused.
"We feel good about Affirm's fundamentals," William Blair said, noting it is comfortable with fiscal 2025, 2026 and 2027 revenue growth estimates of 38%, 24% and 22%, respectively.
Walmart accounts for 5% of Affirm's gross merchandise volume, Linford said.
Not everyone was convinced of Affirm's prospects.
"People can spin it any way they want, but losing a customer like Walmart is a loss for Affirm," Carmel said.
