Buy now, pay later (BNPL), especially popular with younger users, has seen significant traction. One of the biggest names in the space is Klarna, whose platform allows users to split purchases into installment plans at the point of sale, often with lower fees than credit cards.
Following the news that Klarna inked a massive deal with Uber to make the payments platform available to ride-share customers in the U.S., Germany, and Sweden, the natural assumption might be that Klarna would include BNPL functionality for Uber users.
Instead, Klarna will be offering its Pay Now functionality to Uber customers. With Pay Now, Klarna users can make one-click full payments and earn rewards through the app. This feature boasts a solid base of over 25 million users, with 70% of Gen Z and Millennials having used it.
“We view this as a big win for both Uber and Klarna,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “Uber is providing its customers with more ways to pay, and Klarna is getting access to Uber’s 150 million users. Klarna is also expanding its presence as more than just a BNPL app.”
A Global Force
While the Uber deal doesn’t offer traditional BNPL services, users in Sweden and Germany will have the option to consolidate all purchases and pay them off from their salary at the end of the month.
The Uber deal isn’t the only recent development for Klarna. The company recently expanded its platform to support open banking in the UK. This move aims, in part, to cut Visa and Mastercard out of the payments loop for Klarna’s 18 million UK users.
In the U.S., the company launched Klarna Plus, a $7.99-a-month subscription service designed to foster app loyalty. The subscription provides users with discounts on certain brands, increased rewards points, and is designed to jumpstart Klarna’s recurring revenue.
A Soaring Valuation
While the financial details of the Uber deal remain undisclosed, it marks another high-profile partnership for the BNPL giant. If the company maintains its trajectory towards a Q3 IPO, it appears poised to be a significant player in the space. Initial thoughts from analysts suggest the company’s valuation could be in the $20 billion range.
In a prepared statement, Klarna CEO Sebastian Siemiatkowski wrote, “consumers can Pay Now quickly and securely in full, which already accounts for over one-third of Klarna’s global volumes, and more easily manage their finances in one place.”
