Klarna Is Looking More Like a Traditional Bank

Swedish-based buy now, pay later firm Klarna isn’t content with just being a global payments network. With two new products—balance and cashback rewards—that replace traditional retail banking services, Klarna is now positioning itself as the world’s online bank.

Klarna balance lets users store money in a personal account, which can be used for instant purchases and to pay off BNPL loans. Klarna cashback rewards consumers with a percentage of their purchases at participating retailers made through the Klarna app—with rewards conveniently deposited into their Klarna balance. These products are launching in 11 European countries as well as the U.S.

The company holds a banking license in the EU, which allows it to offer up to 3.58% interest on deposits for European customers. But, due to regulatory constraints, it is unable to offer interest on deposits to U.S. customers, which will present a challenge for the service’s adoption in that market.

More New Products

Klarna has been making inroads into traditional banking and everyday financial transactions for years. Since 2021, it has offered checking and savings accounts in Germany. Earlier this year, it announced that the Klarna card would be coming to the U.S. after finding success in several European nations. Issued by the Utah-chartered WebBank, the Klarna card offers flexible payment options anywhere Visa is accepted.

The BNPL company also expanded its offerings this year by introducing open banking services to its 18 million UK customers, allowing them to bypass external card networks and pay directly from their bank accounts. Klarna recently signed a significant deal with Uber, making its payments platform available to ride-share customers in the U.S., Germany, and Sweden. This marks a shift away from traditional BNPL products, instead offering Uber users Klarna’s Pay Now functionality.

This broad-based yet strategic approach has impressed observers, highlighting how the company has effectively built on recent trends and regulatory changes.

“This launch is all about bringing customers into Klarna’s ecosystem by optimizing Klarna as a tool for everyday spending and not just one-off BNPL purchases, said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “These new enhancements are certainly inspired by recent CFPB rulings, particularly in the area of returned items. The cashback feature is also interesting as it really is trying to compete with merchant-funded credit card rewards. Customers will certainly be happy with these new additions.”