Klarna Challenges Banks by Introducing New Savings and Cash-Back Programs

The Swedish fintech behemoth Klarna is unveiling two fresh initiatives this Thursday, aimed at enhancing the appeal of its buy now, pay later (BNPL) service.

Klarna is introducing to consumers in the U.S. and 11 European nations the option to accumulate funds in a Klarna “balance” account. This feature allows users to transfer money directly from their banking accounts into this Klarna account, which they can then utilize for completing purchases in full or for settling BNPL installments.

The initiative rides under the banner “save now, pay later,” as per Klarna’s representation, though it essentially serves as a holding account since the funds do not accrue interest like a conventional savings account, clarified by a representative from Klarna.

Additionally, Klarna is rolling out a program that lets shoppers earn cash back on purchases made through the Klarna app without necessitating a Klarna-branded credit card. This cash back, credited to their Klarna balance, is attributed to purchases at participating merchants, with the possibility of earning up to 10%, a cost borne by the merchants and not Klarna.

Future perks related to these cash-holding accounts were hinted at by the company, though specifics remain undisclosed.

“The primary aim of Klarna Balance is to serve as a portal for users to receive their cash-back sums and process refunds expediently,” said the spokesperson. “Nevertheless, extensive plans are in the pipeline to augment the suite of product features.”

This marks a notable pivot for Klarna, inaugurated 19 years ago as a BNPL service provider, steadily transitioning to incorporate more conventional banking offerings. This commenced with the introduction of the Klarna card in Sweden in mid-2019, followed by launches in Germany in 2021 and the United Kingdom in 2022, and most recently unveiling to a waitlisted audience in the United States in April, now broadly available to U.S. consumers.

Upon launching the card, Klarna announced up to 10% cash back on purchases at select merchants through its app, highlighting that the new facilities do not restrict cash back earnings to card usage alone. This places Klarna in competitive lanes with entities such as Apple, and more recently, Robinhood and BNPL rival Affirm in the credit card domain within the U.S. Notably, Robinhood extends a savings account earning a potential 5% interest for Gold members.

While Klarna is not immediately positioning itself as a direct contender to digital banks, such as Europe’s valuation leader Revolut, these developments certainly indicate Klarna’s aspirations towards that trajectory.

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