Klarna, a “buy now, pay later” company, aims to return to profitability by summer 2023.
Jakub Porzycki | Noor Photos | getty images
Klarna has agreed a major new distribution partnership with fellow fintech unicorn Stripe to expand its reach and add more merchants ahead of its US listing.
The Swedish company’s buy now, pay later (BNPL) service will be available as a payment option for merchants using Stripe’s payment tools in 26 countries, the companies told CNBC on Tuesday.
This is not the first time Klarna and Stripe, which have dual headquarters in San Francisco, have partnered. In 2021, at the height of the fintech craze fueled by the Covid-19 pandemic, Stripe announced that Klarna would offer BNPL plans to the company’s merchants, but with more limited capacity.
The new deal includes improved features for Stripe merchants, including Klarna A/B testing and real-time conversion rate measurement capabilities.
BNPL plans are installment loans that allow consumers to purchase items online or in stores and then repay the debt at a later date or in equal monthly installments. BNPL contracts have become a popular way for people to spread the cost of everyday purchases.
The new partnership with Stripe gives Klarna a major boost as it prepares for its hotly anticipated initial public offering (IPO). Klarna secretly filed for an IPO in the United States last November. According to a report by Bloomberg News last year, the company’s value is estimated to be up to $20 billion.
Klarna makes money from fees retailers pay for each transaction processed through its platform. In return for providing Klarna visibility as a payment option on your payment tool, Stripe will receive a portion of the money Klarna earns on certain transactions.
Klarna declined to disclose the financial terms of its deal with Stripe.
“This is really important to Klarna,” David Sykes, Klarna’s chief commercial officer, told CNBC, adding that the number of new merchants has already doubled in the three months since the company began implementing its new integration with Stripe in October. He added that it has increased.
“We have added 100,000 new franchisees in 2024 and are already seeing increased growth through this deal.” He added:
Analysts recently valued Klarna, founded in 2005, in the $15 billion range. The company, which was at its peak during the pandemic-fueled surge in fintech stocks, attracted a $46 billion valuation in 2021 in a funding round led by SoftBank’s Vision Fund 2.
In 2022, Klarna lost 85% on a new round of funding that valued the company at $6.7 billion.
The deal also has the potential to deliver incremental revenue growth for Stripe.
BNPL proponents promote these plans as a way to increase overall transaction levels because shoppers can buy more items in a short period of time and pay for them over a longer period of time.
A study conducted by Stripe last year found that businesses offering BNPL as a payment method generated up to 14% more revenue due to increased conversion rates and higher average order value.
“Last year we saw a 172% increase in BNPL transaction volume on Stripe, which is much faster than other mainstream payment methods,” Jeanne Grosser, Stripe’s chief business officer, told CNBC, adding that the deal with Klarna was a “win-win.” . “For both companies.
Stripe has long been speculated as a near-term IPO candidate. But the company says it’s in no rush. The company, which has also been a victim of fintech valuation declines, reduced its valuation from $95 billion in 2021 to $50 billion in 2023. The company’s value has reportedly rebounded to $70 billion as part of a secondary share sale.
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