Diving card:
- Swedish buy-now-pay-later giant Klarna said it has started offering savings accounts to its customers in the US and 12 European countries, according to a Thursday’s announcement on the company’s website. Customers can use money from accounts to pay for goods using Klarna’s trademark installments app.
- In another new development, customers will receive cash-back rewards for using the company’s app when they spend at certain retailers. Customers can receive up to 10% in cash from retailers that are part of Klarna’s new program, the post said.
- Klarna made it clear that it is taking the banking sector forward with its latest initiatives. “This marks a significant step forward in Klarna’s mission to disrupt retail banking and become an everyday consumption partner for the world’s consumers,” the company said in the announcement..
Diving Insights:
With the two new features, Klarna is looking to make inroads with consumers around the world and change the way they use their money to make payments and now manage their money.
The company had offered the accounts in Germany since 2021, according to Bloomberg.
Consumers in the US will now be able to transfer money to the Klarna app from their bank accounts and also receive refunds from merchants to the app account. Using Klarna’s signature BNPL services, consumers can finance the purchase of an item with a down payment and an agreement to pay the full amount off after three additional payments over six weeks. Late fees and other charges may still apply in certain situations.
The Klarna move means the company is ready to take on major US banks such as JPMorgan Chase, Bank of America and Wells Fargo. As for which company could act as the bank for the new Klarna accounts, the company was mum on that point.
“We are working with a number of partners to bring the product to market in the US. I’m afraid we won’t publish the names of the banks,” says a spokesperson from Klarna via email.
Stockholm-based Klarna already made a run at US banks when it reintroduced its branded credit card in Aprilwith an assist from bank partner WebBank and the card network Visa. Klarna dropped an earlier attempt in 2022 at a credit card program.
As Klarna seeks to expand its presence in the banking sector, it still faces competition from other BNPL providers, including San Francisco-based Affirm.
The BNPL industry is seeing increasing pushback from regulators seeking to protect consumers from a new form of debt. Consumer Financial Protection Bureau proposed an interpretive rule in May to process any BNPL loans as the agency would process financing provided by credit cards.
Money in Klarna accounts will not receive the same FDIC insurance guarantee as funds in US banks. The company expects that the new accounts will “be primarily a means for consumers to receive cash back and get their refunds faster,” and “do not anticipate that U.S. consumers will hold large amounts” in such accounts, the spokesman said.
“Today’s launches are a big step forward, allowing consumers to earn money while shopping and managing it on a Klarna account,” the company’s CEO, Sebastian Siemiatkowski, said in the post. A Klarna spokesperson was asked to elaborate on the company’s rationale for entering the banking business: “We want to help consumers with their daily spending in areas where traditional banks have not always had their customers’ interests at heart.”
Using the Klarna app, the company’s customers can also pay for goods and services instantly, and about a third of them do, the spokesman says.