Financial technology firm Klarna has made significant strides in the banking industry with the launch of new products aimed at disrupting retail banking and incentivizing customers to use its platform for both spending and saving. This move marks a shift from its traditional buy now, pay later model to a more comprehensive banking approach.
The latest offerings from Klarna include a checking account-like product called Klarna balance and a cashback program that rewards users for shopping through its app. Klarna balance allows users to store money in a personal account similar to a traditional bank account, enabling them to make instant purchases and pay off their buy now, pay later loans seamlessly. Additionally, users can receive refunds for returned items directly into their Klarna balance. On the other hand, the cashback program offers customers the opportunity to earn up to 10% of the value of their purchases as rewards, with the money automatically stored in their balance account.
While Klarna has primarily been known for its buy now, pay later loans, it has ventured into more traditional banking services in recent years. The company initially introduced checking accounts and savings products in Germany in 2021 and is now expanding these offerings to other markets. Customers in the European Union, where Klarna holds an official bank license, can earn up to 3.58% interest on their deposits. However, customers in the United States will not have the same interest-earning capabilities.
Klarna’s move into the banking sector signals a broader strategy as the fintech giant prepares for a potential U.S. IPO. Although the company has not set a definitive timeline for the stock market listing, CEO Sebastian Siemiatkowski has expressed interest in taking the company public. In the meantime, Klarna is reportedly engaging in discussions with investors for a secondary share sale to provide liquidity to its employees. The company’s valuation on the secondary market is estimated to be in the high-teens billions, hinting at strong investor interest in Klarna’s future prospects.
Klarna’s foray into banking represents a strategic move to diversify its product offerings and attract a wider customer base. By introducing new products such as Klarna balance and a cashback program, the company aims to enhance customer loyalty and engagement while positioning itself for long-term growth in the competitive fintech landscape. As Klarna progresses towards a potential IPO and expands its banking services globally, it will be interesting to see how the company continues to innovate and disrupt the traditional banking industry.