Stripe enters 'buy now pay later' partnership with Klarna

Size of deal highlights the growth potential and profitability of the 'Buy Now Pay Later' market

John Collison, president and co-founder of Stripe and Patrick Collison, CEO and co-founder.

Digital payments firm Stripe has entered an agreement with Swedish fintech Klarna to allow retailers to offer the option of paying for goods online in installments.

The two companies said the first results from retailers using the new system show that integration of Klarna has resulted in an average 27% increase in sales. 

On average, retailers using Klarna see a 41% upsurge in average order volume and a 36% increase in purchase frequency, Klarna said in a statement.

The partnership comes as the e-commerce industry sees growing numbers of buy now, pay later systems being offered to customers.

In August, digital payments company Square, headed by Twitter's CEO Jack Dorsey, paid €25bn to acquire the Australian payments outfit Afterpay, the biggest takeover deal in Australian corporate history.

The size of the deal highlighted the growth potential and profitability of the “Buy Now Pay Later” (BNPL) market, in which Afterpay has been a pioneer. 

The market has become even more profitable due to the Covid-19 pandemic, which has accelerated the use of online and cashless payments.

BNPL companies are so-called because they work differently to traditional credit companies.

Afterpay does not charge consumers interest. The majority of its revenue instead comes from merchant fees, charging a commission of 4% to 6% on the value of the transaction plus 30c for every purchase. The rest of its revenue comes from charging fees when customers fail to make repayments on time.

Koen Köppen, chief technology officer at Klarna said that with Stripe, they will be a true growth partner for retailers of all sizes. 

"Allowing them to maximize their entrepreneurial success through our joint services. By offering convenience, flexibility, and control to even more shoppers, we create a win-win situation for both retailers and consumers alike," he said.

Klarna on Stripe is available to all retailers based in a number of countries including Ireland. 

Stripe was founded and is led by Limerick brothers Patrick and John Collison. It was most recently valued at €81.85bn.

Will Gaybrick, chief product officer at Stripe said millions of businesses on Stripe globally can now offer increased payment flexibility. 

"Klarna’s payment options are a powerful tool for online businesses to attract more customers, boost conversion rates, increase basket sizes, and thus grow their revenue," he said.