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Written by Cyndie Martini
on March 17, 2021

Buy-now-pay-later (BNPL) continues to be a force to be reckoned with. We've previously mentioned that a number of large firms are offering BNPL payment options, including Paypal, Affirm, Zip Pay, and Sezzle. BNPL isn't a sideshow. Paypal is a $239 billion company. Affirm went public in January and is worth ~$24 billion.

Klarna, a Swedish fintech giant that offers BNPL, recently announced that it had raised another $1 billion at a $31 billion valuation. Klarna is no newcomer to the BNPL game. It was one of the first BNPL companies.

Why all the BNPL all of a sudden? 2020 was a game-changer for many industries, including payments. As consumers moved to buying everything online while, paradoxically, paying down their credit card balances, BNPL picked up speed. Instead of using a credit card, BNPL lets consumers pay over time in installments. Most BNPL offerings provide four payments over time and a credit card isn't required.

In 2020, about 20% of millennials used a BNPL option, which is nearly double that of GenX. Millennials are not a group merchants can ignore. They were expected to spend $1.4 trillion in 2020.

BNPL isn't a service being offered by random online merchants. In October, Macy's invested in Klarna in exchange for offering its BNPL service at checkout. BNPL actually competes with Macy's store-branded cards. Those cards help Macy's bottom line. But reaching more buyers is worth the additional cost for Macy's. This is another example of how consumer payment behavior is shifting.

As for Klarna, they are looking ahead. Currently, their service is active in 17 countries and at over 250,000 retailers. The company wants to evolve into an all-in-banking app. It already offers several licensed banking services, including its recently released consumer bank accounts service in Germany.

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