Swedish buy now, pay later company Klarna is introducing a $7.99 monthly subscription called Klarna Plus
Courtesy: Klarna
According to David Sandstrom, chief marketing officer, users of the subscription plan, called Klarna Plus, receive no service fees, earn double rewards points and have access to curated discounts from partners like Nike and Instacart.
Buy now, pay later services like Klarna and Affirm have become increasingly popular in recent years as more Americans turn to a new, fintech-enabled form of credit. The services typically split a purchase into four payments.
When Klarna users shop outside the company's network of 500,000 retailers – at places like Walmart, Target, Amazon and Costco – they pay $1 to $2 in transaction fees.
“The main benefit of Klarna Plus right now is that you don’t pay any service fees,” Sandstrom said. “So if you love Klarna and enjoy shopping at Target and Walmart, it makes a lot of financial sense.”
Klarna's monthly plan is the latest example of a fintech company expanding its offerings to increase recurring revenue. Wall Street investors tend to prefer subscription income over one-time transactions because of the predictability. Rival Affirm has reviewed its own subscription plan but hasn't released one yet.
The approach is particularly timely as Klarna is close to an IPO that could be worth more than $15 billion, Sky News reported in November. Klarna CEO Sebastian Siemiatkowski told Bloomberg this week that a listing in the U.S., the company's largest market, was likely imminent.
Achieving this rating would be a kind of compensation for Klarna. The company was Europe's most valuable startup before a collapse made it the poster child for so-called “down rounds” of financing. Klarna's valuation fell 85% to $6.7 billion in 2022 as rising interest rates curbed high-profile fintech companies.
Klarna Plus could help convince investors that the company can grow beyond its core product. The subscription, tested for six months in Ohio last year, was a “no-brainer” for about 15% of the company's heaviest users, Sandstrom said. The company said it has about 37 million American customers.
“We need to prove to ourselves and the market that we can add a new type of revenue stream to Klarna,” Sandstrom said. “This is something that many companies find difficult.”
Next up for the U.S. is a high-yield savings account, Sandstrom said. Klarna Plus customers would likely earn a higher interest rate on savings than non-users, he added.
“If you look at our business from the outside, it looks very much like buy now, pay later,” Sandstrom said. But “with someone you have helped in a financial relationship, a world of possibilities opens up. You can say, 'Hey, wouldn't it make sense to get the Klarna card?'”