Klarna scores global payment deal with Stripe ahead of blockbuster IPO

Klarna has agreed a major new distribution partnership with its fellow fintech unicorn Stripe, in an attempt to extend the reach and add more merchants to the front of its future list in the United States.

Sweden’s Buy Now, Pay Later (BNPL) service will become available as a payment option for merchants using Stripe’s payment tools in 26 countries, the two companies told CNBC on Tuesday.

This is not the first time that Klarna and Stripe, which has dual headquarters in San Francisco, have partnered. In 2021, at the height of the The fintech craze fueled by the Covid-19 pandemicStripe announces that Klarna will offer its BNPL plans to enterprise merchants – but in a more limited capacity.

The new deal comes with better functionality for Stripe merchants, including the ability to A/B test Klarna and measure conversion rates in real time. It comes after Klarna last year offloaded its own online payment business, Klarna Checkout, to a consortium of investors.

BNPL plans are payday loans that allow a consumer to buy something online or in store and then repay their debt, either at a later date or over a period of equal monthly installments. BNPL deals have become a popular way for people to spread the cost of everyday purchases.

The new tie-up with Stripe gives Klarna a big boost at a time when it is preparing for a much-anticipated initial public offering. Klarna filed confidentially to IPO in the United States in November. The company could take a valuation of as much as $20 billion, according to a Bloomberg News report last year.

Klarna makes money from the fees merchants pay for each transaction processed through its platform. In exchange for giving Klarna visibility as a payment option in its checkout tools, Stripe will receive a portion of the money Klarna makes from a given transaction.

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 has already doubled the number of new merchants in the three months since it began implementing the new integration with Stripe in October.

“We will add 100,000 new merchants in 2024 and we have already seen the growth rate increase with this agreement.” he added.

Analysts recently valued Klarna, which was founded in 2005, in the $15 billion range. At its peak during the pandemic-led surge in fintech stocks, the company attracted the valuation of $46 billion in a funding round led by SoftBank’s Vision Fund 2 in 2021.

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

The deal also has the potential to drive incremental revenue gains for Stripe, as well.

BNPL proponents present these plans as a way to increase the overall level of transactions, as buyers can buy more items during a shorter window and then pay for a longer time.

A study that Stripe conducted last year found that companies that offer BNPL as a payment method generated up to 14% more revenue from increased conversion and a higher average order value.

“We saw BNPL’s volume grow 172% last year on Stripe, which is much faster than other mainstream payment methods,” Jeanne Grosser, Stripe’s chief business officer, told CNBC, adding that the agreement with Klarna was a “win-win”. “for both companies.

Stripe has long been speculated to be a short-term IPO candidate — for its part, though, the company says it’s in no rush. The company, also a victim of a decline in fintech valuations, has reduced its valuation to $50 billion in 2023 from $95 billion in 2021. The valuation of the company reported returned to $70 billion, as part of a secondary share sale.