The Swedish “buy now, pay later” pioneer said on Tuesday that its new design will help users find the items they want using more advanced AI recommendation algorithms, while marketers will be able to target customers more effectively.
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Klarna announced on Wednesday a global partnership with Uber to boost payments for the giant’s Uber and Uber Eats apps.
The partnership will see the Swedish financial technology company added as a payment option in the US, Germany and Sweden, Klarna said in a statement.
In these countries, Klarna will deploy the “Pay now” option in the two apps, which allows customers to pay for an order immediately with one click. Users will be able to track all their Uber purchases in the Klarna app.
The company will also offer an additional payment option for Uber users in Sweden and Germany, allowing users to bundle their purchases into a single, interest-free payment deducted from their monthly salary.
Interestingly, the company does not implement buy-now-pay-later installment plans on its platforms, arguably Uber’s most popular service offering.
Sebastian Siemiatkowski, CEO and co-founder of Klarna, said in a statement on Wednesday that the deal represented a “significant milestone” for the company.
“Consumers can now pay quickly and securely in whole, which already accounts for over a third of Klarna’s global volume, and more easily manage their finances in one place,” said Siemiatkowski.
Klarna declined to disclose the financial terms of its deal with Uber.
Big pre-IPO trader win
The Uber deal marks one of Klarna’s most significant merchant wins in recent memory and comes as the European fintech giant is rumored to be preparing for a blockbuster initial public offering that could value the company at $20 billion.
Klarna has begun holding detailed discussions with investment banks to work toward an IPO that could happen as early as the third quarter, Bloomberg News reported in February, citing unnamed sources familiar with the matter.
CNBC could not independently verify the accuracy of the report. Klarna said it does not comment on market speculation.
Such a market swing would mark a turnaround for a company that saw $38.9 billion wiped off its valuation in 2022 when worsening macroeconomic conditions fueled by Russia’s invasion of Ukraine caused a reset in high-tech valuations.
Klarna raised an impressive $45.6 billion in a 2021 funding round led by SoftBank, before seeing its market value drop to $6.7 billion the following year in a so-called “down round.”
The company recently launched a monthly subscription plan in the US to lock in “power users” ahead of expected IPO.
The product is called Klarna Plus and costs $7.99 per month. Klarna Plus allows users to waive service fees, earn double reward points and access select discounts from partners such as Nike and Instacart.
Last year, Klarna posted its first quarterly profit in four years after reducing its credit losses by 56%.
The company posted an operating profit of 130 million Swedish kroner (about $11.7 million) in the third quarter of 2023, compared to a profit for a loss of 2 billion Swedish kroner (about $183.6 million) in the same period last year.
Buy now pay later boom
Klarna is one of several “buy now, pay later” services that allow users to pay off their purchases over a period of monthly installments.
The payment method is becoming increasingly popular with consumers shopping online and in person. It can also be an alternative to credit cards that charge interest and high fees.
But it has also raised concerns about the affordability of such services and whether it actually encourages some consumers—especially younger ones—to spend more than they can afford.
In the UK, the government has proposed bills to regulate the ‘buy now, pay later’ industry.
The US Consumer Financial Protection Bureau has previously said it plans to subject buy-now, pay-later lenders to the same oversight as credit card companies.
Meanwhile, the European Union last year approved a revised version of its Consumer Credit Directive to include buy-now, pay-later services within the scope of the rules.
For its part, Klarna has defended its “buy now, pay later” model, arguing that it offers customers a cheaper way to access credit compared to traditional credit cards and consumer loans.
The company also said it welcomes the “buy now, pay later” product arrangement.