In the midst of the payment technology revolution, Buy Now, Pay Later (BNPL) is the fastest-growing online payment method in various places including, the UK, US, Australia, and more.
This trend is growing in popularity, especially among millennials, who tend not to keep credit cards. Many experts believe this payment solution is expected to triple over the next couple of years.
At present, many fintech companies are enabling a new kind of consumer behaviour, normalising the use of PoS loans (buy now and pay later scheme) for everyday purchases. Based out of Stockholm, Klarna is one such company that gives customers the freedom to choose how and when to pay.
Secured £721 million
As we reported a few days back, the Swedish company has secured $1 billion (approx £721 million) in an equity funding round to accelerate international expansion and further capture global retail growth.
The oversubscribed round included a combination of new and existing investors and, closed at a post-money valuation of $31 billion (approx £22.3 billion), making Klarna the highest-valued private fintech in Europe and the second-highest worldwide.
Sebastian Siemiatkowski, co-founder and CEO of Klarna: “At Klarna, we solve problems – that is the heart of what we do for both consumers and retailers. Consumers want transparent products to help them bank, shop, and pay that reflect the way they live their lives, not just outdated traditional models. Each and every one of us at Klarna will continue to work hard on this, but it is also time for us, with our culture of change, disruption, and innovation, to focus on tackling bigger, more complex issues. I believe our industry has a responsibility to help in some way solve global sustainability issues and I hope others will join Klarna in our ambition.”
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In 2020, the company witnessed 46% and 40% YoY growth in volume and revenue to more than $53 billion and $1 billion respectively.
Pledges 1% of the capital
The company has announced an initiative under which it will pledge 1% of the capital raised to focus on key sustainability challenges globally. The initiative will be formally launched on April 22 on World Earth Day, says Klarna.
How did Klarna become a fintech success?
Sebastian Siemiatkowski started his working life early at 15 in Uppsala at Burger King, where he met Niklas Adalbert. They both instantly hit-off and began discussing ideas. Siemiatkowski started Klarna in 2005 with Niklas Adalberth, along with Victor Jacobsson, who he met later while studying at Stockholm School of Economics.
The three men in their early twenties started Klarna with the idea of offering consumers to pay the bill for goods after receiving them. Even though consumers were a bit hesitant to shop online then, it’s a whole new different story now.
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Before the purchase, Klarna analyses a person’s credit history and browsing behaviour to determine if they are creditworthy. Upon gaining the trust of consumers, the three co-founders started the journey of convincing retailers to take up their service, one by one.
The Swedish company began to strike deals with global retailers like Ikea, Adidas, Zara, and others including, UK fashion retailer iSmash, which runs 26 shops in London, Manchester, and Leeds. According to Siemiatkowski, the potential to boost sales is the reason why retailers take up their service.
Shop and pay in a smarter way
The company offers direct payments, pay after delivery options, and instalment plans in a one-click purchase experience. Currently, Klarna has more than 250,000+ retail partners including Macys, Etsy, Sephora, Ralph Lauren, and Urban Outfitters.
Klarna has over 3,500 employees and is active in 17 countries. Klarna has been backed by Sequoia Capital since 2010 and more recently, Dragoneer, Bestseller Group, Permira, Visa, Atomico, Ant Group and Silver Lake, HMI Capital, TCV amongst others.
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Like Klarna, many other companies have adopted the model, rehashed it, customised it, and thrived in the UK’s BNPL payment industry. Let’s take a look at these Klarna alternatives from the British landscape.
Zilch
Founder/s: Serge Belamant
Funding: £31.5M
Zilch is an over-the-top (OTT) Buy Now Pay Later (BNPL) product that allows its customers to shop wherever Mastercard is accepted.
The Leeds-based company optimises its users’ cash flow whilst preventing indebtedness through its data-driven credit assessment technology. It is merchant agnostic and offers users unrestricted access to the entire online retail space.
Clearpay
Founder: Nick Molnar
Funding: NA
Clearpay is an international payments platform, built to enable financial wellness for the next generation of shoppers. The startup allows consumers to pay in four interest-free instalments and are rewarded for paying on time.
It is known as Afterpay in Australia, the United States, and New Zealand. It offers over 64,000 of the world’s best retailers and has more than 11 million active customers globally.
DivideBuy
Founder/s: Max Thowless-Reeves
Funding: £60M
DivideBuy offers interest-free finance in a simpler, easier way for retailers and consumers. The Staffordshire-based company offers a fast 60-second application process and an immediate decision which means that customers can spread the cost of their purchases with no hidden charges.
The fintech’s eCommerce credit plugin integrates with shopping cart functionalities such as Shopify, Magento, WooCommerce, and Craft Commerce.
Purple Dot
Founder/s: John Talbott, Madeline Parra
Funding: £1.4M
Purple Dot provides a plug-in for websites that allows customers to request the retailer drop the price of an item by anything between 10 to 20%, which the company calls a ‘worth-the-wait’ payment option.
This financing option enables both parties to make a clear, informed decision on the sale. The London-based startup aims to help fashion brands tackle wasted inventory, drastic sales tactics, and the profit erosion that comes with it.
Purple Dot is working with various small boutiques across the country and is currently in discussions with several major UK and US high street brands.
Payl8r
Founder/s: NA
Funding: NA
Payl8r is a flexible, and modern method of paying for goods & services online and in-store. The Manchester-based company offers an alternative to credit cards that does not burden the consumer with debt or fees. Payl8tr works with several training providers, travel companies, and tattoo studios among its partner merchants.