Fintech giants Stripe and Klarna partner on 'buy now, pay later' as competition heats up

LONDON — Stripe and Klarna, two of the world’s biggest private fintech companies, are teaming up.

Stripe said Tuesday it has agreed a strategic partnership with Klarna to offer the Swedish firm’s buy now, pay later payment method to its merchants.

“Together with Stripe, we will be a true growth partner for our retailers of all sizes, allowing them to maximize their entrepreneurial success through our joint services,” said Koen Koppen, Klarna’s chief technology officer.

Stripe, which helps businesses accept payments online, said the tie-up would make it easier for retailers to add Klarna as a payment option on their website. Klarna typically partners with stores directly to embed its checkout button. The move could give Klarna a much wider reach of customers.

Founded in 2005, Klarna has become one of the biggest names in European tech recently thanks to the massive surge in demand for its buy now, pay later (BNPL) service, which lets users spread the cost of their purchases over a period of interest-free installments.

Klarna makes money from deals with retailers, which pay the company a small cut on each transaction processed through its platform. Stripe said early results showed merchants saw a 27% increase in sales on average after integrating with Klarna, while average order value climbed 41%.

Critics have accused BNPL companies of encouraging customers — particularly younger ones — to spend more than they can afford. In the U.K., the government has made proposals to regulate the nascent industry to protect consumers from potential harms.

Britain’s Treasury last week kicked off a consultation inviting views on the regulation.

Stripe’s deal with Klarna could be a way for the payments giant to capitalize on a fast-growing trend as rivals like Square and PayPal make big moves in the space. Square recently agreed to acquire Australia’s Afterpay for $29 billion, while PayPal has its own BNPL service and is buying Japanese rival Paidy for $2.7 billion.

As well as partnering globally, Stripe and Klarna said they were also strengthening their relationship in North America. Stripe is now used in about 90% of Klarna’s payment processing volume in the U.S. and Canada, the companies said.

Last valued at $95 billion, Stripe is the world’s largest privately-held fintech start-up, according to CB Insights data. Klarna is the second-biggest globally, with a market value of nearly $46 billion. Both companies are expected to go public in the near future.