Klarna unveils a debit card, expanding its services beyond Buy Now Pay Later
Klarna Expands Financial Services Offerings in U.S. and EU
Klarna, the popular buy now, pay later (BNPL) provider, is making significant strides to broaden its financial services offerings, aiming to transform into a digital bank that competes with traditional financial institutions.
In the United States, Klarna has secured a $26 billion forward flow agreement with Nelnet, a leading student loan and consumer finance company. This deal will support the expansion of Klarna's interest-free Pay in 4 installment product, providing scalable funding off-balance-sheet to fuel growth in the large and growing U.S. market.
In the U.K., Klarna Financial Services UK has received authorisation as an Electronic Money Institution (EMI) by the Financial Conduct Authority (FCA). This authorisation unlocks the launch of broader financial products like Klarna balance and Klarna Cashback, signalling a move beyond BNPL towards full-service digital banking and financial management.
Sebastian Siemiatkowski, CEO of Klarna, wants Americans to associate Klarna with a neobank offering and PayPal wallet experience. The company's strategic vision emphasises transitioning from its BNPL roots into broader financial services that include managing, spending, and rewarding consumers.
The Klarna Card, facilitated by Visa Flexible Credential, is planned for a nationwide rollout and a European Union launch later this year. The Card offers shoppers the option of payment deferral and is linked to an FDIC-insured account functioning as a bank account. It is being piloted with a select group of consumers.
Klarna's partnerships aim to help the company expand its footprint, diversify its product offerings, and compete with traditional banks in modern money management solutions. Affirm and FIS recently partnered to integrate BNPL options into debit card programs, a move that could potentially benefit Klarna as well.
Klarna reported rising active BNPL users and increased revenues, with low credit losses and promising growth metrics ahead of a potential IPO. The company's deeper market penetration and product diversification indicate a positive outlook for its future financial performance.
In summary, Klarna’s broader strategy is to leverage its BNPL foundation to develop a comprehensive digital banking platform in both the U.S. and EU markets. This involves scaling existing credit products responsibly while introducing new offerings that enhance everyday financial management, enabled by capital deals and regulatory approvals that provide funding and operational flexibility.
- To bolster its financial services and move beyond buy now, pay later offerings, Klarna plans to launch new products such as Klarna balance and Klarna Cashback, leveraging technology to enable full-service digital banking and personal finance management.
- With the acquisition of scalable funding through the Forward Flow Agreement with Nelnet and regulatory approval as an Electronic Money Institution in the UK, Klarna isgunning to transform into a neobank using its buy now, pay later roots while offering modern solutions like payment deferral and digital banking services.
