Klarna inks global payments deal with Stripe ahead of blockbuster IPO

Klarna has agreed a major new distribution partnership with fintech unicorn Stripe as it looks to expand its reach and add more merchants ahead of its upcoming US listing

Klarna’s buy-now-pay-later (BNPL) service will be available as a payment option for merchants using Stripe payment tools in 26 countries, the two companies told CNBC on Tuesday.

This is not the first time that Klarna and Stripe have collaborated. In 2021, at the peak of Fintech craze sparked by the Covid-19 pandemicStripe has announced that Klarna will offer its BNPL plans to the US firm’s merchants.

BNPL plans are installment loans that allow a consumer to buy something online or in-store and then repay their debt either later or over a period in equal monthly payments. BNPL arrangements have become a popular way of sharing the cost of everyday purchases.

The new collaboration with Stripe gives Klarna a big boost as it prepares for its long-awaited initial public offering. Klarna privately filed for an IPO in the US in November. According to A., the company can be valued at 20 billion dollars Bloomberg News last year’s report.

Klarna makes money from the fees retailers pay for each transaction processed through its platform. In exchange for Klarna’s visibility as a payment option in its payment tools, Stripe will receive a share of the money Klarna earns from a given transaction.

Klarna declined to disclose the financial terms of the deal with Stripe.

“This is really important 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 the new integration with Stripe went live in October.

“We’ve added 100,000 new merchants in 2024, and we’re already seeing that growth rate increase with this agreement.” he added.

Analysts recently valued Klarna, founded in 2005, at $15 billion. At its peak during the pandemic-induced boom in fintech stocks, the company attracted a an estimate of $46 billion in a financing round led by SoftBank’s Vision Fund 2 back in 2021.

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

The deal also has the potential to add additional revenue for Stripe.

BNPL supporters tout the plans as a way to boost overall transaction levels as shoppers can buy more items in a shorter period of time and then pay for them over a longer period of time.

A study conducted by Stripe last year found that businesses offering BNPL as a payment method saw 14% more revenue through increased conversions and higher average order value.

“BNPL grew 172% on Stripe last year, which is much faster than other major payment methods,” Jeanne Grosser, Stripe’s business director, told CNBC, adding that the Klarna deal was a “win-win.” “for both firms.

Stripe has long been thought to be a candidate for an IPO in the near future, but for its part, the company says it’s in no rush. The company, which has also been hit by falling financial technology valuations, cut its valuation 50 billion dollars in 2023 from $95 billion in 2021. Evaluation of the company according to reports rebounded to $70 billion in a secondary stock sale.