Klarna Advances in Travel, Putting New Pressure on Traditional Credit Card Issuers

Klarna, a leader in the buy now, pay later arena, has announced a new partnership with global airline outfit Lufthansa Group to bring more payment flexibility to travelers. 

The partnership enables customers of Lufthansa Group to opt for Klarna’s payment plans at checkout when purchasing travel experiences, according to a press release on the union.

People who enjoy using BNPL for purchases may welcome the news of Klarna’s alliance with Lufthansa Group, but it may cause angst for credit card issuers that aren’t looking to give up market share in the travel space.

Travelers in many countries, including the U.S., Sweden, and Switzerland, will be among the first to have access to the new options from Klarna and Lufthansa Group, which allow consumers to pay for their travel in full at the time of their purchase, at a later date, or to spread the cost of their travel experience over time.

David Sykes, Chief Commercial Officer at Klarna, commented on Klarna’s partnership with Lufthansa Group and how it stands to bring convenience to the travel market.

“Travel is one of the most meaningful investments people make,” Sykes said in the press release. “Together, we’re giving travelers the confidence to book their trips their way — with more flexibility, transparency, and choice than ever before.”

In addition to Lufthansa Group, Klarna also has partnerships with other travel brands, including Airbnb, Expedia, and Hotels.com.

Payments for travel experiences can be a significant source of income for many credit card issuers. Travel purchases not only lead to more interchange fees for issuers, but they can also cause interest income to rise if revolving balances grow.

A recent analysis projects that the global travel credit card market will expand at an 11.8% compound annual growth rate to top $48 billion by 2032.

In the co-branded credit card realm, consumers with travel-affiliated cards spend approximately 32% more each month, on average, than consumers who use retail-affiliated credit cards.

Credit card issuers face a formidable foe in BNPL providers, in part because of the way buy now, pay later options appear to consumers. Klarna’s payment options will display at checkout to users making a purchase from the Lufthansa Group.

Research projects that the global travel credit card market will grow to surpass $48 billion by 2032.

That means that at least a portion of consumers stand to see Klarna’s payment options at checkout before they have a chance to pull out their credit cards to complete a transaction. For some consumers, Klarna’s presence at checkout may cause them to view BNPL payment options as more convenient than credit card payments.

Credit card issuers can move to lessen the threat of BNPL providers stealing market share away from them in the travel payment space by reminding cardholders of the benefits that using a credit card affords them. 

Many issuers offer cardholders better rewards and loyalty programs than BNPL providers do. And credit cards typically come with robust consumer safeguards, including protection against fraud, that buy now, pay later companies may not be able to match.