Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Klarna’s New $7.99 Monthly Subscription Plan Pre-IPO
BNPL | Jan 24, 2024
Image: Unsplash/Christiann Koepke
Klarna Introduces Monthly $7.99 Subscription Plan Ahead of Anticipated IPO
The latest development in the Buy Now, Pay Later (BNPL) sector is the introduction of Klarna's new subscription plan, "Klarna Plus," priced at $7.99 per month. This move comes as Klarna gears up for its anticipated initial public offering (IPO). The Klarna Plus subscription offers several benefits to its users, including no added service fees when using Klarna’s One Time Card, double rewards points, and access to exclusive discounts with popular brands like Nike, COACH, Macy’s, Instacart, and GOAT. The company estimates that loyal Klarna users could save about $12 monthly through this plan.
See: Klarna’s Meteoric Rise in the Canadian Financial Ecosystem
The new subscription model appears to be part of Klarna's strategy to diversify its revenue streams and enhance its appeal to investors ahead of its IPO. By introducing a monthly subscription, Klarna not only aims to lock in its most dedicated users but also to establish more predictable, recurring revenue. This is in contrast to the less predictable nature of one-time transactions which have been typical in the BNPL sector.
Klarna is also planning to launch a high-yield savings account, which may offer higher interest rates for Klarna Plus customers than non-users. This is part of Klarna's broader strategy to expand beyond its traditional BNPL services and offer a wider range of financial products.
This strategic shift by Klarna and others in the BNPL market reflects a growing trend in the fintech industry to create more stable and diverse revenue streams, especially as these companies prepare for public market debuts. Competitors in the BNPL space, like Affirm, are also reportedly considering similar monthly plans, indicating a shift in the industry towards more subscription-based services.
2024 BNPL Trends
There are a lot of BNPL reports in market pointing to continued growth in the sector.
- In the U.S. there were 50 million Americans using BNPL services in 2021. That figure is forecasted to exceed 94 million in 2024.
- BNPL is achieving widespread adoption and quickly becoming a payment option standard with more and more customers expecting BNPL availability from all financial institutions and merchants.
- The BNPL global market will be valued at $309.2 billion in 2023 with a CAGAR of 25.5% until 2026.
Image: Insider Intelligence and Fit Small Business
- Millennials are the greatest users of BNPL services (56%) versus GenZ (49%), GenX (36%), and Boomers (26%). Approximately 40% of Buy Now, Pay Later (BNPL) service users fall within the 25-34 age bracket who earn between $20 - $50k annually.
- A growing number of financial influencers (finfluencers) are endorsing BNPL and providing financial advice to Gen Z on social platforms.
- More TradFi institutions are considering BNPL offerings to appeal to younger customers but they need to implement carefully to avoid credit issues.
- Growing sense that BNPL users could eventually replace traditional credit card use. A recent survey found that people spent nearly $700 more on BPL than credit cards in a 90 day period.
- The sector is likely to see more regulation to protect consumers which may encourage new users like the underbanked to dabble in BNPL.
Image: PYMTS and Fit Small Business
Outlook
The outlook for the Buy Now, Pay Later (BNPL) industry, particularly with Klarna's new initiatives, is one of evolution and expansion. As the sector continues to grow, companies like Klarna are exploring new revenue models, such as subscription services, to stabilize and diversify their income streams. The shift towards subscription models like Klarna Plus could signal a change in how consumers engage with BNPL services, potentially leading to increased loyalty and regular use among a dedicated customer base.
See: Amazon & Affirm’s BNPL Service Aids Small Business Growth
The introduction of additional financial products, like high-yield savings accounts, suggests that BNPL companies are broadening their scope to offer more comprehensive financial services. Overall, the BNPL sector appears poised for significant growth and transformation, driven by consumer demand, technological advancements, and strategic shifts by key players like Klarna.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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