Products You May Like
Klarna on Wednesday announced a global partnership with Uber to power payments for the ride-hailing giant’s Uber and Uber Eats apps.
The partnership will see the Swedish financial technology firm added as a payment option in the U.S., Germany, and Sweden, Klarna said in a statement.
In the U.S., Germany, and Sweden, Klarna will roll out its “Pay Now” option, which lets customers pay off an order instantly in one click, in the Uber and Uber Eats apps. 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 which allows users to bundle purchases into a single, interest-free payment that gets taken out of their monthly salary.
Interestingly, the company isn’t rolling out installment-based buy now, pay later plans, arguably its most popular service offering, on Uber’s platforms — only immediate payments and monthly payments.
Sebastian Siemiatkowski, CEO and Co-Founder of Klarna, said in a statement Wednesday that the deal represented a “significant milestone” for the company.
“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,” Siemiatkowski said.
Klarna declined to disclose financial terms of its deal with Uber.
Big pre-IPO merchant win
The Uber deal marks one of the most significant merchant wins for Klarna of late, and comes as the European fintech giant is rumored to be gearing up for a blockbuster initial public offering that could value the firm at north of $20 billion.
Klarna began having detailed discussions with investment banks to work on 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 has said that it doesn’t comment on market speculation.
Such a market flotation would mark something of a turnaround for a company that saw $38.9 billion erased from its valuation in 2022, when deteriorating macroeconomic conditions stoked by Russia’s invasion of Ukraine caused a reset of sky-high tech valuations.
Klarna reached an eye-watering $45.6 billion in a 2021 funding round led by SoftBank, before seeing its market value fall to $6.7 billion the following year in a so-called “down round.”
The firm recently launched a monthly subscription plan in the U.S. to lock in “power users” ahead of its anticipated IPO.
The product, called Klarna Plus, costs $7.99 per month, and enables users get their service fees waived, earn double rewards points and access curated discounts from partners including Nike and Instacart.
Last year, Klarna reported its first quarterly profit in four years after cutting its credit losses by 56%.
The company posted operating profit of 130 million Swedish krona in the third quarter of 2023, swinging to a profit for a loss of 2 billion Swedish krona in the same period a year earlier.
Buy now, pay later boom
Klarna is one of many “buy now, pay later” services that allow users to pay off their purchases over a period of monthly installments.
The payment method has become increasingly popular among consumers to pay for online and in-person shopping purchases, as an alternative to credit cards which charge interest and high fees.
However, it has also stoked concerns about the affordability of such services, and whether it is in fact encouraging some consumers — particularly younger people — to spend more than they can afford.
In the U.K., the government has proposed draft laws for regulating the buy now, pay later industry.
The U.S. Consumer Financial Protection Bureau has said previously it plans to subject buy now, pay later lenders to the same oversight as credit card companies.
Meanwhile, the European Union last year passed a revised version of its Consumer Credit Directive to include buy now, pay later services under the scope of the rules.
For its part, Klarna has defended the buy now, pay later model, arguing it offers customers a cheaper way of accessing credit in comparison to traditional credit cards and consumer loans.
The company also says it welcomes regulation of buy now, pay later products.