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Klarna Bank AB, a leading exemplar of the trend toward offering installment-plan payments online and at the point of sale, has received backing from Ant Financial Services Group in a deal that cements an existing alliance between the two companies and could add considerable propulsive force to Klarna’s relatively new consumer app.
China-based Ant, parent of the hugely popular Alipay mobile wallet, and Klarna announced early Wednesday that Ant has bought an unspecified “minority stake” in the 15-year-old unicorn. Citing a Klarna spokesperson, CNBC reported Wednesday morning Ant’s position comes to “less than 1%” of Klarna’s equity. A unicorn is a privately held company with a valuation of $1 billion or more.
Ant’s move results in a much closer relationship between the two companies, which are already cooperating on payments. Shoppers on AliExpress, for example, can use Klarna to make installment payments. AliExpress is a global e-commerce site owned by Alibaba Group, of which Ant Financial is the payment arm.
The tighter relationship also comes just 10 months after Klarna’s introduction of an app that allows users to pay merchants online without leaving the app. Users make four equal payments, paying the first installment immediately and the other three at two-week intervals. The number of downloads is now 33 times that seen in May, Klarna says, without giving a specific number.
Installment payments at the point of sale have gained considerable attention in the last couple of years as merchants and payments companies seek ways to open online and in-store payments to a broader cross-section of consumers. Mastercard Inc., for example, in April acquired Vyze Inc., a prominent startup in the business. Other competitors include Affirm Inc., which a year ago clinched a deal to support installment payments at Walmart Stores Inc.
“Buy now, pay later is a rapidly expanding category in digital commerce and Klarna is one of the global leaders,” says Thad Peterson, a senior analyst at Aite Group, in reacting to Wednesday’s news.
Now, with Ant’s ownership stake, both companies stand to benefit beyond what they might have expected from their cooperative agreements, Peterson says. “The deal offers the potential of significant expansion for Klarna,” he notes in an email message. “The combination of Alipay and Klarna dramatically increases Klarna’s global footprint and adds millions of potential customers. For Alipay, adding Klarna enhances the value proposition for their payment offering and further legitimizes Alipay as a global payment alternative.”
As things stand, Klarna is accepted at more than 200,000 merchants and e-commerce platforms, with more than 75,000 having been added last year, the company says, adding that some 85 million consumers use Klarna.
