CommBank enters exclusive partnership with Afterpay’s US competition
Afterpay rival Klarna is now the most valuable fintech in Europe.
Swedish buy now pay later provider Klarna has made its first move into the Australian and New Zealand markets with an exclusive partnership with the Commonwealth Bank. The news comes as Klarna raised US$460 million in an equity funding round, of which CommBank took part, taking Klarna's total valuation to US$5.5 billion. This makes Klarna the largest private fintech in Europe.
Klarna was founded in 2005 and currently operates in more than 14 countries. This includes the US, the UK and various countries throughout Europe. It offers a service similar to Australian buy now pay later providers Afterpay and Zip by letting consumers split the cost of purchases into instalments. The service differs slightly in that consumers can choose to delay their payment for 14 or 30 days after delivery, in 3 equal instalments or into equal monthly payments. All options are interest-free.
CommBank said the new investment into Klarna is part of its strategy to extend its digital capabilities. On 31 July 2019, the bank announced a new-look app which uses technology such as artificial intelligence (AI) to give its users personalisation features, custom notifications and budgeting tools.
"As part of our strategy to lead in retail and commercial banking and to extend our digital capabilities, we have signed an agreement with Klarna, a leading global payments provider with over 60 million customers and 130,000 merchants," CommBank said in its ASX announcement. "Klarna generated US$627 million of revenue in 2018."
CommBank invested US$100 million into Klarna and said it intends to invest further at the parent and local level to support the partnership.
According to Klarna, the new equity funding round will help continue its US growth where it's currently growing at 6 million new US customers annually. It made headlines in January 2019 when it added Snoop Dogg as an investor and named him as the face of its new marketing campaign. In the US it has partnered with several notable merchants including ASOS, Kulus, Toms and Sonos and will soon go live with Boohoo Group and H&M. It competes there with Australian buy now pay later provider Afterpay which expanded there in May 2018 and has since also expanded to the UK.
Speaking about the latest funding announcements, CEO and co-founder of Klarna Sebastian Siemiatkowski said it was a decisive time in the history of retail banking.
"Finally, transparency, technology and creativity will serve the consumer, and there will be no more room for unimaginative products, non-transparent terms of use or lack of genuine care of one's customers," he said.
"We, all 2500 of us at Klarna, are humbled and honoured, and now also further empowered, to play a role in this improvement of an industry for the benefit of the consumer, worldwide and in the US in particular. "
