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Tuesday, February 18, 2025

Klarna Partners with Stripe to Enhance its Reach, but the BNPL Industry’s Future Remains Uncertain

Klarna Expansion Puts A Spotlight On Bnpl Services
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For nearly 20 years, Andrew has worked for financial institutions ranging from regional investment organizations to some of the largest banks in the world. At Wells Fargo, Andrew was a Consultant within the Insight and Innovation division. A graduate of the University of Georgia’s Terry College of Business, Andrew’s goal has been promoting personal financial wellness and solid money decisions. As a Staff Writer for CardRates, Andrew seeks to inform readers of solutions to help them on their path to financial freedom.

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  • Klarna is partnering with Stripe to bring its BNPL services to new territories.
  • Government agencies such as the CFPB have signaled that increased regulatory scrutiny may be in store for businesses operating in the BNPL space.
  • The CFPB’s impact on financial oversight may change drastically under President Trump’s watch.

Payments innovator Klarna has announced a partnership with Stripe that enhances the company’s global reach. As a result of the alliance, businesses around the world that use Stripe can offer Klarna to their customers.

The partnership has helped Klarna double the number of new merchants that offered its services for the first time in 2024’s fourth quarter.

If you’re not familiar with Klarna, you likely will be soon. Teaming up with Stripe brings Klarna’s buy now, pay later (BNPL) services into 25 countries and allows businesses employing Stripe to instantly offer Klarna payment options to their customers.

“At the core, Klarna is a global network connecting 85 million active consumers with retailers,” David Sykes, Klarna’s Chief Commercial Officer, said in a press release. “The more retailers we add, the more consumers we attract and vice versa. The ambition is to make Klarna payments available everywhere, for everything, all the time.”

The BNPL industry is gaining momentum among consumers who need creative payment tools to get by in trying economic times when inflationary pressures have diminished their purchasing power.

Those who regularly shop online have probably seen the pink Klarna badge on an online retailer’s checkout page. Shoppers who use Klarna to buy an item have four options to complete their purchase.

Pay in full: Selecting this option enables a shopper to pay for the full price of their purchase at checkout.

Pay in four interest-free payments: This option empowers shoppers to split the cost of their purchase into four interest-fee payments distributed every two weeks.

Pay in up to 30 days: Consumers can use this option to buy an item now and pay for it within 30 days of purchase without incurring interest or making upfront payments.

Pay over time: Similar to a traditional lending tool, this option allows shoppers to buy an item today and pay for it over an extended period of time. Consumers who choose to pay over time with Klarna make interest payments as they repay their obligation.

Klarna, Stripe, and consumers aren’t the only ones who stand to benefit from Klarna’s enhanced availability. Businesses who offer Klarna payment options also stand to see positive results.

According to a recent Stripe study, consumers are more likely to complete a purchase when presented with a BNPL option at checkout. The increased tendency to complete a transaction translates to a 14% increase in revenue among businesses who offer BNPL options.

Jeanne DeWitt Grosser, Stripe’s Chief Business Officer, said via a press release that, “Stripe is now the easiest way for businesses to offer Klarna. Thanks to our partnership, businesses on Stripe will continue to grow their revenue and offer consumers more options in how they can pay.”

Regulatory Hurdles May Impede Growth

The payments industry figures to keep a close eye on BNPL services as more consumers gain familiarity with the BNPL products and companies such as Klarna grow. And make no mistake about it, BNPL payment tools are growing in popularity.

“We’ve seen BNPL volume grow 172% last year on Stripe, which is much faster than other mainstream payment methods,” Grosser told CNBC.

Klarna and Stripe partnership
The Klarna and Stripe partnership will bring more BNPL options to consumers worldwide.

Businesses can struggle to catch the public’s eye, but when they do, other stakeholders are bound to take notice. The increased attention for BNPL is bound to make the payment option appear on more financial regulators’ radars in the near future.

Up to this point, BNPL offerings haven’t been regulated as strictly as other payment vehicles, including credit cards. The Consumer Financial Protection Bureau (CFPB), which is a government agency that shields consumers from financial institution practices it deems unfair, only began studying the BNPL market in 2021.

The CFPB issued an interpretive rule on BNPL lender obligations in May 2024. The industry can expect to hear more from the CFPB as consumers increasingly turn to BNPL programs to complete more purchases, encountering payment challenges that haven’t come to light heretofore in the process.

Jonathan Feniak, an attorney who owns and operates Feniak Consulting Group LLC and has legal expertise in regulatory compliance, agrees that regulators may soon turn more attention to BNPL.

“The Klarna partnership could lead to more BNPL adoption, which could drive consumer debt higher,” Feniak told us. “We will see governments scrutinizing BNPL and regulating them much like they do with other financial credit products.”

But what those regulations will ultimately look like remains unclear. Further muddying the waters is the unknown role the CFPB will play in shaping future financial regulations. President Trump’s initial days in office created more questions than answers about the CFPB’s future.

One of Trump’s first maneuvers upon returning to the Oval Office was to issue an executive order stating that all executive departments and agencies “do not propose or issue any rule in any manner, including by sending a rule to the Office of the Federal Register (the “OFR”), until a department or agency head appointed or designated by the President after noon on January 20, 2025, reviews and approves the rule.”

With many consumers turning to BNPL options, payment industry insiders will need to keep a close eye on Trump’s go-forward strategy regarding the CFPB. New regulations, or the lack thereof, will significantly impact the way this growing industry further establishes itself as a major player in the payments arena.