Klarna's foray into financial services in North America and Europe has added a distribution strategy that expands its presence at the point of sale alongside U.S.-based rivals.
The Swedish firm in the past week has entered into partnerships with Dutch payment technology company Adyen and Apple, extending Klarna's buy now/pay later ability to offer lending in brick-and-mortar stores and to consumers who are buying IOS-powered electronic devices.
Klarna, which operates a bank in its home country and is better known as a BNPL lender in North America, is reportedly planning a public listing in the U.S. in 2025. As BNPL becomes more generic,
"We see that as we add more merchants, that increases our value to consumers, so we attract more consumers, which increases our value to retailers. It creates a virtuous flywheel of value," said Erin Jaeger, head of North America for Klarna.
The collaboration with Adyen will go live this month. Klarna had previously used Adyen to reach online merchants, but the new partnership will potentially make Klarna available to more than 450,000 in-store merchants in North America, Europe and Australia.
"We have partnered with other [payment processors] for local implementation of the in-store product, but Adyen is the first global [processor] to launch this across the world," Jaeger said.
The underlying technology, product and underwriting are the same as Klarna's online BNPL option. The difference is how the merchant shares payment details with Klarna. A QR code is shown on the payment terminal, which customers scan with their phones. This opens the Klarna app with the payment and purchase details pre-filled and then the consumer can complete the payment.
Merchants can request Klarna be activated from Adyen's customer portal. The product is called Klarna In-Store and the merchant-facing brand is Dynamic QR. Consumers will see the same Klarna branding that appears on online purchases. Klarna collects a fee for each transaction, similar to its revenue model for online payments.
Klarna's partnership with Apple, which went live on Oct. 1, places a service called Apple from Klarna on the tech company's storefront and on Klarna's app. This enables consumers to purchase Apple products using Klarna's line of BNPL or lending options. Klarna has also added an "upgrade financing" service that consumers can use to buy Apple devices with an option to trade in their device for an upgrade at the end of the loan's term, or keep their current device for a final interest-free payment.
Klarna's Apple partnership comes after the tech company
"Partnerships and distribution channels are critical to the adoption of any value-added payment solutions, and BNPL is no exception," said Aaron Press, research director for IDC Insights. "Merchants are much more likely to adopt functionality that is easy to implement and easy to operate. This is especially true for brick-and-mortar SMBs, who don't have a lot of technology resources."
BNPL has become more popular in the U.S. in recent years, making it a useful way to build relationships with consumers and merchants. About 47% of consumers say BNPL enabled them to make a purchase, 38% said it helped fit the purchase within their cash flow and 34% said they wanted to see how the service worked, according to
Gen Z consumers are more likely than boomers to report they did not have a high enough limit on their credit card and thus examined BNPL as an option, Arizent reported.
"As BNPL gets more mature, distribution deals like these become more important, because consumers have a choice of providers, and being the preferred provider is a big advantage," said Aaron McPherson, principal at AFM Consulting. "Since there is no real advantage to sticking with a single BNPL provider, consumers are much more likely to go with the default option than to choose from a list."
The goal for BNPL firms such as Affirm, Klarna, Afterpay and others is to entice merchants to offer BNPL at the register, both in person and online according to Tony DeSanctis, senior director at Cornerstone Advisors. There is also a battle to get consumers to use payment cards tied to BNPL firms. Klarna updated its
"For example, it's easier for me to have a BNPL-based card than add 3,000 restaurants or small business retailers one at a time," DeSanctis said. "It also allows you to offer your BNPL solution at a competitor's merchant. Affirm partners with Amazon and Walmart, but if I give a consumer a Klarna debit card, I get that BNPL transaction even if I don't have that merchant relationship."
