Klarna strikes global payments deal with Stripe ahead of massive IPO

Klarna has struck a major new distribution partnership with fintech unicorn Stripe as it looks to expand reach and add more merchants ahead of its imminent US launch

Klarna's buy now, pay later (BNPL) service will become a payment option for merchants using Stripe's payment tools in 26 countries, the companies told CNBC on Tuesday.

This isn't the first time Klarna and Stripe have collaborated. In 2021, at the height of the fintech boom sparked by the Covid-19 pandemic, Stripe announced that Klarna would make its BNPL program available to the US company's merchants.

BNPL schemes are installment loans that allow consumers to purchase goods online or in stores and then pay off the debt later or in equal monthly installments. BNPL arrangements have become a popular way for people to spread the cost of their everyday purchases.

The new partnership with Stripe gives Klarna a huge boost as it prepares for its highly anticipated initial public offering. Klarna filed confidentially for a U.S. IPO in November. Bloomberg reported last year that the company could be valued at as much as $20 billion.

Klarna makes money from the fees retailers pay for each transaction processed through its platform. In return for giving Klarna visibility as a payment option in its checkout tool, Stripe will receive a portion of the money Klarna makes from specific transactions.

Klarna declined to disclose the financial terms of its deal with Stripe.

“This is really significant for Klarna,” David Sykes, Klarna's chief commercial officer, told CNBC, adding that the company had increased the number of new merchants in the three months since it began implementing its new integration with Stripe in October. Double.

“We are adding 100,000 new merchants in 2024 and we are already seeing increased growth rates from this agreement,” he added.

Analysts recently valued Klarna, founded in 2005, at $15 billion. The company attracted a $46 billion valuation in a 2021 funding round led by SoftBank Vision Fund 2 amid a pandemic-led surge in fintech stocks.

In 2022, Klarna took an 85% cut in a new round of funding that valued the company at $6.7 billion.

The deal also has the potential to generate incremental revenue growth for Stripe.

BNPL supporters see these schemes as a way to increase overall transaction levels, as shoppers can buy more items in the short term and then pay them off over a longer period.

A study conducted by Stripe last year found that businesses that offered BNPL as a payment method experienced a 14% increase in revenue due to improved conversion rates and higher average order values.

“Last year, we saw BNPL transaction volume on Stripe grow 172%, which is much faster than other mainstream payment methods,” Stripe chief commercial officer Jeanne Grosser told CNBC. She added that the deal with Klarna is a “win-win.” “For both companies.

Stripe has long been speculated to be a candidate for an IPO in the near future, but the company says it's in no rush. The company has also been a victim of plummeting fintech valuations, with its valuation slashed from $95 billion in 2021 to $50 billion in 2023. The company's valuation reportedly rebounded to $70 billion as part of a secondary stock sale.