What happened: Buy now, pay later (BNPL) company Klarna made its debut on the New York Stock Exchange on Wednesday at a ~US$20 billion valuation, notching one of the biggest IPOs of the year.
- Klarna has seen its Canadian user base nearly double in the past year, and the company now boasts 111 million users globally.
Catch-up: The product that put Klarna on the map is its “pay-in-4” model, where shoppers split purchases into four instalments. Partnerships with retailers like Walmart and Aritzia as well as food delivery services like Uber Eats give customers the easy option to defer payments for everything from a pair of shoes to a Chipotle burrito bowl.
Why it matters: BNPL’s popularity is skyrocketing with Gen Zers and Millennials, who make up an estimated 72% of all BNPL borrowers in Canada. Those young customers, who typically have less savings to fall back on, are increasingly taking out these mini-loans for everyday purchases.
Yes, but: Believe it or not, handing out microloans for everyday purchases can be a double-edged sword. Klarna’s losses from unpaid loans spiked 17% year over year, while in the U.S., over 40% of BNPL users reported paying back their loans late in the past year.
What’s next: Klarna has made it no secret that it’s looking to take on big banks and credit card companies, and even launched its own debit card this year that, you guessed it, can be used to make BNPL purchases.—LA