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The Stripe and Klarna partnership signals wider growth strategies for the two fintechs

  • Klarna is teaming up with Stripe to offer BNPL to its merchants, one of the biggest moves into the space after rivals Square and PayPal.
  • The partnership allows the two largest private fintech companies to push forward their strategy of being a one-stop-shop for their clients.

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The Stripe and Klarna partnership signals wider growth strategies for the two fintechs

The increasingly competitive flexible payments market witnessed another big move last week when Stripe and Klarna announced their partnership.

With this new deal, both companies are looking to expand their product offerings - Stripe adds flexible payment options to its repertoire, while Klarna gets access to new markets and customers. 

Stripe, the fintech whose name has become synonymous with modern payments solutions, is valued at $95 billion, while Klarna’s market value of nearly $46 billion makes it the second-biggest fintech globally. Both firms are expected to go public in the near future. 

Through this collaboration, the goal was “less so for Stripe to attract new users than to help existing users grow their revenue”, according to the fintech’s Nordic Manager, Erik Olofsson. The main focus here was to increase conversions and order value, as well as attract new customers, he noted.

The metrics posted by the two companies also support this argument, with Stripe reporting that its customers are seeing an average 30% increase in cart conversion and 41% increase in order value by offering Klarna. Moreover, the new payment method led to an average 27% increase in sales and retailers saw a 36% increase in purchase frequency on average, Stripe said. 

This is all a part of the bigger picture Stripe is aiming to paint - building an online one-stop shop that helps businesses grow their revenue and manage their financial operations.

“In response to our users’ feedback, we’ve built tools that support a host of needs like invoicing, billing, sales tax calculations, revenue recognition, fraud prevention, and even a seamless way to contribute to carbon reduction,” Olofsson told Tearsheet. 

Another important area of focus for Stripe is financial services. The firm is already helping businesses embed banking-as-a-service directly into their products by helping with money management accounts, credit card issuing and flexible business lending. 

“Crucially, we’re doing this in partnership with financial institutions like Goldman Sachs, Citi and Evolve Bank & Trust. These partnerships allow us to combine our expertise and ensure the financial system and the internet continue to evolve and work well together.”

At Klarna, the partnership fuels its strong growth momentum, as its customer base has doubled since June 2020 to 20 million customers in the US alone. 

“In the US we recently announced strategic partnerships with some of the largest mall operators in the country, including Simon and Macerich as we expand our footprint into brick-and-mortar. We also continue to grow and enter new industries, such as travel and social commerce, to ensure the best possible customer experience and value for our retail partners,” said David Sykes, Klarna’s Head of North America. 

Going forward, the company is thinking about the full end-to-end shopping experience for its clients, which includes alternative payments, price drops, curated content and inspiration, or even tracking deliveries. 

“We have always taken it as a starting point that the Klarna button will coexist next to many different options at checkout - that's why we're obsessively focused on all the reasons why consumers and merchants would select Klarna,” Sykes said. 

Stripe’s deal with Klarna capitalizes on the fast-growing BNPL trend as rivals like Square and PayPal have also been making big moves in the space in recent months. Square bought Australia’s Afterpay for $29 billion in September, while PayPal’s BNPL product Pay in 4 will be joined by an acquisition of Japanese BNPL Paidy in a $2.7 billion deal.

However, this new generation payments option has also drawn some criticism. Recent research showed that BNPL users may be falling into the same traps that they were hoping to escape by abandoning their credit cards, with 34% falling behind on one or more payments, according to a study published by Credit Karma. Furthermore, almost three-fourths (72%) of these consumers believe their credit score has declined as a result of missing the payments.

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