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How Klarna Is Expanding Beyond a BNPL solution to challenging retail banks

Buy now, pay later pioneer Klarna is launching its own banking accounts in Germany. Klarna was already a bank as the holder of a Swedish banking license, but without fully playing the "Bank" role in Europe. This is a remarkable step and certainly a big challenge for challenger banks!

The pandemic and the shift to a digital environment have created a perfect ground for digital innovation as we have seen a number of startups flourish in 2020. Particularly, challenger banks have been the subject of many success stories. 

ecommerce share of retail sales growth
E-commerce share of retail sales. Source: Emarketer.com

Klarna is now entering the challenger banks landscape also through the launch of consumer bank accounts in Germany. The feature will essentially allow Klarna users to have further control over their finances. The announcement has been well received by the public as many expressed they would switch from their current bank account as soon as it is possible.

 A Klarna bank account will come with a Visa debit card which can also be connected to both Google Pay and Apple Pay. The initial offering will exclusively be made available to a limited number of Klarna’s most loyal consumers as a beta test before gradually offering it to all Klarna users in Germany over the next few months.

With the launch Klarna promises to offer:

  1. A Klarna bank card which is free of charge
  2. This card will be able to be accepted in both physical and online stores who accept VISA payments.
  3. Smart Budgeting and spending categories. So essentially, many features similar to what neobanks offer.

With the Klarna card, consumers will now be able to also carry out POS transactions, through Card Present or Card Not Present payments with their phone via debit, credit or installments. 

This news is exciting not only because Klarna is already a well established & highly popular payment solution, but also because they are directly competing with German retail banks who have only recently started implementing modern digital banking services. We also can’t help but wonder how Klarna’s move will affect the currently leading challenger banks. 

 But how does Klarna’s bank app differ from any other budgeting app?

A bank account with Klarna allows the customer to keep track, manage and predict their spendings. While these functions are provided by many budgeting apps, the biggest difference remains that with a typical budgeting app, the user often has to manually enter their transactions.

A unique feature by Klarna is the Item level detail and visibility of individual prices of the purchased items. Something that other banks cannot give because they are not integrated at the checkout and only get the aggregate value of the purchase, merchant account and time of purchase. Bottomline, Klarna is an APM, checkout-solution and now pretty much also an omnichannel retail bank.

The main takeaway

What is particularly interesting is that we are seeing a trend where major BNPL solution providers are going beyond lending through providing deposit products. AfterPay too announced launching more financial services in 2020. It looks like the initial offering of BNPL solutions for eCommerce was just an entry product to establish a footprint. It looks like Klarna is heading towards creating their own financial super-apps like Google is trying to do.  

Would you be willing to switch from your current bank account to Klarna or do you think that the benefits are not worth the switch?

If you are interested in following the latest news in fintech, make sure to check out our latest edition of the Fintech Magazine.

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