Swedish Fintech Firm Klarna’s Monthly Subscription Plan: A New Revenue Stream and Financial Relationship
3 min read
Swedish fintech firm Klarna, known for its buy now, pay later services, is expanding its offerings with a new monthly subscription plan called Klarna Plus. This move comes as the company prepares for an initial public offering (IPO) in the United States, where it has its largest market. The subscription plan, which was piloted in Ohio for six months last year, is expected to be announced later in January 2024.
The main proposition of Klarna Plus is that users do not pay any service fees. This is a significant advantage for Klarna’s heaviest users, who shop frequently at retailers such as Target, Walmart, Amazon, and Costco. These retailers are not part of Klarna’s network, and users typically pay $1 to $2 in transaction fees when shopping there. By waiving service fees for Klarna Plus subscribers, the company aims to make the service financially attractive to its most frequent users.
Klarna’s monthly plan is the latest example of a fintech player building out its offerings to boost recurring revenue. Wall Street investors tend to favor subscription revenue because of its predictability versus one-time transactions. Rival Affirm has also explored its own subscription plan, though it has not released one yet.
The approach is especially timely as Klarna nears an IPO that could value it at more than $15 billion. Klarna CEO Sebastian Siemiatkowski has indicated that a listing in the U.S. market is imminent. Achieving this valuation would be a redemption of sorts for Klarna, which was Europe’s most valuable startup before a collapse that saw its valuation sink 85% to $6.7 billion in 2022 due to rising interest rates.
Klarna Plus could help persuade investors that the company can grow beyond its core product. The subscription is expected to appeal to about 15% of the firm’s heaviest users, who make up a significant portion of its 37 million American customers. By offering additional services and financial products to these users, Klarna can deepen its relationship with them and potentially increase its revenue.
The next step for Klarna in the U.S. market is the launch of a high-yield savings account. Klarna Plus subscribers are likely to earn a higher interest rate on their savings than non-subscribers. This offering could further differentiate Klarna from its competitors and provide an additional revenue stream for the company.
Beyond its core buy now, pay later service and the Klarna Plus subscription, the company is exploring other financial products and services. By expanding its offerings, Klarna aims to become more than just a buy now, pay later service. The company sees an opportunity to provide a range of financial products and services to its users, helping them manage their money and build better financial habits.
In conclusion, Swedish fintech firm Klarna’s monthly subscription plan, Klarna Plus, represents a new revenue stream and financial relationship for the company. By offering additional services and financial products to its heaviest users, Klarna can deepen its relationship with them and potentially increase its revenue. The launch of a high-yield savings account is the next step in this strategy, and the company is exploring other financial offerings to further differentiate itself from its competitors. As Klarna prepares for an IPO, the success of Klarna Plus and its other offerings will be closely watched by investors.
