US fans of Klarna’s ‘Pay in 4’ service can now join a waitlist for a Klarna Card which will allow cardholders to use Buy Now Pay Later in store and online.
Buy Now Pay Later (BNPL) is a form of short-term credit, where a customer makes a purchase with borrowed money, and then pays it back, usually in installments, in the future. The first of these payments is made at checkout, when you opt to use the BNPL service.
Klarna’s new card will be facilitated by Visa, allowing customers to have BNPL at their disposal at all times, whether shopping in a physical or online score. This move is welcomed by the US’s 25 million Klarna users, who constitute Klarna’s fastest growing market. BNPL has proved increasingly popular among US consumers for a few reasons.
Firstly, repayments usually bear no-to-low interest rates, making BNPL a cheaper means of borrowing than through most credit cards or loans. Secondly, BNPL is an easily accessible form of financing that requires minimal checks. Through offering a physical BNPL card, Klarna is making borrowing even easier for borrowers. Additionally, due to the shifting retail habits ushered in by the Covid era, online shopping has surged. Naturally, so has BNPL.
The US is following the UK’s, Sweden and Germany’s lead in offering this card, and will partner with stores to allow cardholders to benefit from their loyalty – or ‘vibe – scheme. This offers additional benefits to an already user-centric platform. Buy Now Pay Later has, in recent years, become one of the most sought after forms of borrowing money.
Buy Now Pay Later is popular due to its flexibility and low-interest repayments, taking muc of the financial stress out of borrowing. However, Buy Now Pay Later is most welcome among the retail industries.
When it comes to covering more urgent costs, such as home repairs, schemes like BNPL are rarely applicable. At times like these, borrowers turn to sources of quick cash, such as payday loans, which provide borrowers with physical cash as opposed to funding a transaction through a third-party platform.
Since Klarna’s 2005 launch they have been pivotal in the evolving world of borrowing. With over 250,000 partners who accept Klarna’s BNPL payments, Klarna is assisting consumers in over 20 markets and has been valued at $45.6 billion, which is no meat feat given that they are competing with significant counterparts, such as PayPal Credit and Affirm. At present, Klarna already processes around two million transactions every day, which is expected to climb following the popular rollout of their card.
Klarna’s card will offer users interest free credit. Meanwhile, the average US credit card bears interest of 16.17%. On an $100 purchase, a borrower would be saving $16.17 by instead placing the transaction through their Klarna Visa card.
Of course, making borrowing so accessible and attractive comes with its dangers, too. Before using a creditor’s funds, borrowers should be sure that they can pay back their debt. Failing to do so can be costly and damaging in the future, hence it has attracted criticism from regulators. However, you need to stay on top of all your purchases and ensure that you can afford to repay any purchases on-time.