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Economic uncertainty stemming from the Covid-19 pandemic has stoked consumer interest in point-of-sale credit, and providers of the service are acting to satisfy that urge. The latest moves came Tuesday from payments processor Klarna AB and installment-credit provider Afterpay Ltd.
Klarna said it will provide its installment-payment feature to Macy’s for the iconic department store’s online customers. As with most installment services at checkout, Klarna’s program requires four equal payments at no interest. The Macy’s deal also represents a wedge for Klarna into a relatively new retail market.
Traditional department stores like Macy’s had been struggling for years before the pandemic, a condition that has only grown worse in recent months as consumers contend with unemployment and strung-out credit card balances. The U.S. unemployment rate registered at 10.2% in July before easing off somewhat to 8.4% in August. In the spring, as the pandemic caused nationwide lockdowns, the rate climbed as high as 14.7%.
But the deal also taps into another pandemic-related trend: a boom in e-commerce as consumers shop from home to avoid infection. “Klarna is delighted to partner with Macy’s as the shift to online retail accelerates and the company continues to innovate and enhance its digital offerings to meet evolving consumer expectations, for which smart and flexible payments are essential,” said Sebastian Siemiatkowski, Klarna’s chief executive.
With the turn to e-commerce, Klarna saw its total payment volume climb 44% in the year’s first half as the company added 14 million new users, reaching a total of roughly 85 million globally. Although the United States accounts for about 9 million of these users, the country is “soon going to become our largest market,” Siemiatkowski told the Reuters news service in August.
For its part, Macy’s is not only integrating the Klarna Pay in 4 feature in its shopping site, it is also becoming an investor in the payments company, according to Tuesday’s news release.
But Klarna isn’t the only POS installment lender targeting traditional retailing giants. Afterpay said it will work with Simon Property Group, the mall developer, to promote Afterpay’s service in stores as retailers look ahead to the holiday shopping season.
“Our new in-store solution is yet another way to support merchants by offering a powerful budgeting tool that allows shoppers to spend their own money over time, whether they prefer to buy in a physical store or online,” said Melissa Davis, Afterpay’s executive vice president for North America, in a statement. Consumers can use Afterpay at the point of sale through the app. Purchases can then be made via Apple Pay or Google Pay.
Afterpay launched in the United States two years ago and now claims more than 5 million users and 15,000 retailers in the market. Overall, it says it has 9.9 million active users and a merchant base of 55,400.
The market for installment payments at checkout or at the physical point of sale is attracting a number of major players, including Visa Inc. and PayPal Holdings Inc. PayPal launched its Pay in 4 service in August, supplementing its longstanding PayPal Credit product. Visa introduced its Installment APIs last year .
