Why is Klarna diving into subscriptions?

Klarna has recently launched a new subscription-based product called Klarna Plus in the U.S.

The news: With a monthly cost of $7.99, Klarna Plus earns consumers double reward points. Users can spend with Klarna’s One Time Card at retailers outside of Klarna’s network to shop without paying service fees. Consumers will also have access to exclusive discounts through the subscription.

“The main proposition of Klarna Plus right now is that you don’t pay any service fees, so if you love Klarna and if you love shopping at Target and Walmart, it makes a ton of sense financially,” said David Sandstrom, Klarna’s Chief Marketing Officer.

Context: The BNPL provider-turned-ecommerce-platform’s offering comes as the company gears up for its IPO. Through its subscription offering the firm can build out a recurring revenue stream by locking in customers through Klarna Plus. There is speculation that Wall Street’s love of subscription models will bolster the company’s IPO work. Perhaps one reason why investors love subscription models is that the recurring revenue is forward-looking and companies that have made a shift towards these models have raised their revenue by a lot more than those who haven’t.