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Tag: Buy Now Pay Later

  • Klarna’s First Public Earnings Report: Strong US Growth, ‘Neobanking’ and A.I.

    CEO Sebastian Siemiatkowski says Klarna is evolving from BNPL to a full “neobank.” Photo by Spencer Platt/Getty Images

    Today (Nov. 18), Klarna reported its first quarterly earnings as a public company. The fintech giant, which debuted on the New York Stock Exchange in September, is growing quickly as it leans into A.I. and looks to expand beyond its Buy Now, Pay Later (BNPL) service into more traditional banking offerings.

    Klarna beat Wall Street expectations with $903 million in revenue for the July–September period, a 26 percent increase from a year earlier. In its largest market, the U.S., sales rose 51 percent from a year ago.

    The company also posted gains in gross merchandise volume (GMV), an e-commerce metric measuring the value of goods sold. GMW jumped 23 percent year-over-year to $32.7 billion for the quarter. One gloomy spot was net income, which swung to a $95 million loss compared to a $12 million profit during the same period in 2024. Klarna attributed the decline partially to a change in accounting principles.

    Demand also increased for Klarna’s “Fair Financing” option, which lets customers spread payments for larger purchases over longer periods. U.S. GMV for the offering jumped 244 percent during the quarter, while global GMV rose 139 percent. Fair Financing is now available at 151,000 merchants, or 18 percent of Klarna’s total merchant base.

    Klarna is still best known for its BNPL services, but the company aims to shift “from payments to full neobank,” CEO Sebastian Siemiatkowski said during his company’s earnings call. A neobank refers to a fintech firm that offers banking services without a physical branches, such as Chime or Revolut.

    In July, Klarna launched the “Klarna Card,” a payment card that combines BNPL features with a traditional debit card. The product has already gained more than 4 million signups, according to Siemiatkowski, and accounted for 15 percent of Klarna’s global transactions as of October.

    Klarna slows hiring amid A.I. push

    Klarna is also turning to A.I. to move into new areas. As an early adopter, the company has embraced the technology across personal shopping, internal productivity tools and even an A.I. avatar of Siemiatkowski capable of presenting earnings.

    A.I. has transformed customer service as well: an A.I. assistant Klarna introduced last year now performs the work of more than 850 full-time employees and has saved the company $60 million, Siemiatkowski said. In part because of these efficiency gains, Klarna does not “believe that hiring is the right approach at this point in time,” he added.

    That doesn’t mean the CEO is unconcerned about A.I.’s impact on workers. While blue-collar jobs are typically vulnerable during economic downturns, Siemiatkowski warned that A.I. could more heavily affect “high-income households and white-collar jobs.” He said he is closely monitoring unemployment trends to understand how the technology might affect consumers who rely on Klarna.

    Klarna’s First Public Earnings Report: Strong US Growth, ‘Neobanking’ and A.I.

    Alexandra Tremayne-Pengelly

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  • Comparing buy now, pay later programs: Are installment plans a budget win or finance fail? – MoneySense

    Comparing buy now, pay later programs: Are installment plans a budget win or finance fail? – MoneySense

    Some BNPL providers report your payment history to credit bureaus, which can positively affect your credit score if you make the payments on time. In addition, many BNPL providers only run a soft inquiry on your credit report to determine eligibility. That said, it’s possible that a credit check isn’t done at all. So, in this case, your credit report and credit score won’t be impacted by simply applying for BNPL. 

    There are some potential downsides. BNPL loans often require repayment within a short period, especially for smaller purchases, which might not contribute significantly to building your credit history. In that case, a credit card would be a better option. In addition, not all providers report to credit bureaus, which can create what deHaan calls “phantom debt.” When your credit score goes down, credit card companies can see this and won’t offer or approve you for another card, but that’s not the case with BNPL. This can cause consumers to take on more debt than they can handle. 

    DeHaan explained how it works: “So, I open a BNPL account with one provider, I max it out, I can’t pay it off. I go to the next one, I do the same thing… And before I know it, I’ve got three or four maxed-out credit lines, and the reason I can keep getting them is because there’s no reporting about each other’s maxed-out limits.” 

    Before signing up for any BNPL service, ensure you can comfortably repay your purchases in full. While BNPL can potentially boost your credit score through timely payments, it can also negatively impact your score if you miss any payments, leading to additional debt from late fees and interest charges.

    What’s in it for retailers?

    BNPL options benefit retailers in several ways. It can increase sales by allowing customers to spread out payments, encouraging them to spend more with larger purchases. In addition, BNPL providers typically handle the financial transactions and assume the risk of non-payment, so there’s no risk to the retailers themselves.

    What does a credit counsellor think about buy now, pay later?

    While the convenience of BNPL can be tempting, it’s important for consumers to read and understand the terms and conditions that come with installment plans. If you’re not careful, BNPL may deter you from achieving your financial goals. Like all loans, these plans aren’t without risks. Here are a few to know about.

    BNPL can lead to overspending

    For some, installment plans can encourage impulse spending. Deferred payments are an extremely popular option for many Canadians feeling the pinch of inflation and lifestyle creep. Being able to buy something that was previously unobtainable may tempt you to spend more than you can afford. 

    “When credit is cheap and easy, some might get themselves into trouble by spending beyond their means. With BNPL, many of the users tend to be the most vulnerable [financially], and they might not yet have a credit score,” deHaan said. 

    Doris Asiedu

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  • As most stores close for Thanksgiving, Black Friday may bring the biggest crowds since before COVID

    As most stores close for Thanksgiving, Black Friday may bring the biggest crowds since before COVID

    Stay home and eat your turkey. Most stores, other than supermarket and pharmacy chains, aren’t open until Black Friday morning.

    The frenzied mall mobs characteristic of Black Friday — and Thanksgiving, until COVID shutdowns squashed that retailer move to out-compete one another — had faded even before the pandemic, with the growth of e-commerce and ever-earlier holiday promotions, which this year began well before Halloween.

    Despite evidence showing that shoppers recently have pulled back, data from consumer surveys indicate that overall spending is expected to hit unprecedented levels this holiday season.

    U.S. consumers, buoyed by a robust labor market, have demonstrated unexpected resilience even as they contend with stubborn inflation. But to pull off this spending feat, a significant number of shoppers are expected to rely on credit cards and buy-now-pay-later plans to fund their holiday spending this year.

    “They might buy fewer gifts because things are more expensive, but we expect spend to be up,” said George Noceti, a wealth advisor at Morgan Stanley. “So we think that this will be another banner year in terms of Black Friday, Cyber Monday, and all the discounting that goes on in January.”

    The National Retail Federation predicted that holiday spending will be up 3% to 4% from last year, reaching record levels between $957.3 billion and $966.6 billion. The increase in spending is predicted to slow from last year’s 5.4% boost, according to the trade group’s data.

    Online shopping is expected to be robust, starting on Thanksgiving.

    “Now it’s very online focused, and we’re really looking to see the online velocity surge on the major days like Black Friday and Cyber Monday,” said Vivek Pandya, lead analyst at Adobe Digital Insights. In line with recent years, e-commerce sites are expected to be inundated on Black Friday and Cyber Monday as consumers shop from the comfort of home.

    The four-hour window from 6 to 11 p.m. Pacific time Monday is expected to be the busiest shopping period of all, with spending projected at nearly $4 billion, according to Adobe Analytics data.

    Black Friday may not be the bellwether of the holiday shopping season that it once was, but overall retail sales during the season remain an important gauge of consumer health and a key source of retailer profits. Consumer spending on goods and services accounts for nearly 70% of the nation’s economic activity.

    Although retail sales and consumer confidence fell in October, people feel differently about the holidays.

    “We’re seeing disproportionately more optimism as it relates to holiday shopping versus regular day-to-day and regular discretionary shopping,” said Mrin Nayak, a managing director and partner leading holiday research at Boston Consulting Group.

    Consumers want major discounts, and they are likely to find them this year. Holiday discounting lagged in 2020 and 2021 in response to economic uncertainty and fueled by consumers’ increased savings during the stay-at-home era of the pandemic.

    Given the precarious situation of many consumers, retailers know that shoppers are demanding major discounts — and will hold out for the best deals. Analysts project that many shoppers will also rely on credit cards or buy-now-pay-later programs to finance their holiday purchases, a strategy that carries the risk of added interest and other costs.

    Many retailers offer buy-now-pay-later programs. And most buy-now-pay-later apps — backed by companies including Afterpay, Klarna and Affirm — let users split their final bill into four interest-free payments, an attractive alternative to using credit cards, which have an average interest rate more than 19%, according to November data from Bankrate.

    “The consumer is bargain-hunting this year,” Nayak said. “They are looking for deals to counter inflation, and they are looking to make sure that they’re shopping at places that give them really differential value versus the rest of the year.”

    The latest Adobe Analytics figures show that in the days leading up to Black Friday, retailers were already marking down products in popular categories: Electronics, appliances, toys and apparel were discounted on average more than 20%.

    “I think because we’re seeing this level of discounting that we’re profiling across these categories, it’s helping keep consumers incentivized to spend this season,” Pandya said. “But we’re expecting the discounts to get bigger and better on these major days between Black Friday and Cyber Monday.”

    Low unemployment is expected to help power the shopping season. The U.S. job market has remained steady despite pressure from rising interest rates, with employers adding an average of 204,000 jobs a month between August and October.

    “The unemployment rate is extremely low, so people are getting a paycheck,” Noceti said.

    Gen-Z and millennials are predicted to spend big this year, fueled by low unemployment and healthy wage gains in their demographics.

    “Labor markets have disproportionately favored younger generations that might have more disposable income this holiday season,” Nayak said. “And so we’re expecting to see that divergence in the consumer based on generation on willingness to spend.”

    One third of Gen-Z and millennials plan to spend more on holiday gifts than last year, according to findings from Boston Consulting Group. At the same time, only 20% of baby boomers plan to spend more, squeezed by inflation and fixed income budgets.

    Carly Olson

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  • SNBL or BNPL? That is the question! 

    SNBL or BNPL? That is the question! 

    For long, Buy Now Pay Later or BNPL has been a popular model for making purchases with consumers using the easily available option to buy stuff ranging from appliances to gadgets to practically everything. 

    But now a disruption seems to be happening in the segment and a bunch of start-ups – the most common category of disruptors – are taking the BNPL model head-on by offering a Save Now Buy Later (SNBL) option. 

    SNBL, as the name suggests, is a combination of saving for a future purchase. The added benefit – and a very important one – is that one gets discounts – ranging from 10 per cent to as much as 20 per cent at times – on the purchase price. 

    SNBL is a mechanism that has brought saving and spending on the same platform and while historically there have been such schemes available in India for decades, a clutch of start-ups is now using the power of technology and data to make it available to the masses. 

    Start-ups like Tortoise, Hubble, and Multipl to name a few operate in the SNBL space in India and have been seeing strong traction in terms of the number of users though the overall segment is still in its infancy. 

    Gurgaon-based Hubble, which was launched in April 2022, currently has tie-ups with merchants like Nykaa, Myntra, Croma and Bluestone and is in the process of collaborating with 20 more brands. 

    Delhi-based Tortoise is another well-known start-up in the SNBL space and offers a minimum 10 per cent incentive to every user who saves to buy on the platform. 

    Then, there is Bengaluru-based Multipl, which also operates in the SNBL segment, but has a slightly different business model as it also allows users to invest in curated mutual fund schemes that can generate returns and lower the overall cost of the goal. 

    Currently, most of the merchant tie-ups are in the categories of travel, gadgets, and appliances though these start-ups in the SNBL space are actively working towards enhancing the bouquet of categories or goals – weddings as a goal has also been gaining prominence.   

    Also read: Buy Now, Pay Later during festive season: Is this your best option?

    Here is how it works. 

    There is a simple registration process post which the user can choose a merchant (for instance, Apple, MakeMyTrip, Croma, Myntra, Nykaa, etc) through which he or she intends to make the purchase.  

    Thereafter, the goal amount and duration of deposits have to be selected and one can start from as low as ₹500 as monthly deposits. Say, for instance, one can set aside ₹5,000 every month for 10 months while targeting a purchase of ₹50,000. 

    Meanwhile, how the incentives are given out can differ from one platform to another. Hubble, for instance, gives a gift card for the cumulative amount – money deposited plus the incentive value – while Tortoise credits the money back to the user’s account and gives a 10 per cent cashback when the invoice is submitted. 

    Interestingly, if the growth numbers are anything to go by, then the SNBL platforms are indeed creating an impact.  

    Tortoise has signed up over 1.5 lakh customers on its app since it launched in April 2022 and aims for a gross merchandise value or GMV of $5 billion over the next four years across 4-5 verticals covering travel, electronics, and appliances, home & auto, personal care and luxury. 

    Hubble, on the other hand, has registered more than 4 lakh app downloads and has been witnessing its revenues jump 50 per cent on a monthly basis. 

    These start-ups have also seen investments from marquee names from the investing community – Sequoia Capital, Blume Ventures, IIFL Finance, Kunal Shah of Cred, and Sriharsha Majety of Swiggy among others –enter the ring. 

    Data from Tracxn shows that while Hubble is backed by Sequoia and Snapdeal co-founder Kunal Bahl among others, Bengaluru-based Tortoise has the backing of Vertex Ventures and Better Capital along with Cred’s Kunal Shah. Meanwhile, Multiple has been funded by names like Blume Ventures, IIFL Finance, GrowX Venture Management, and Kotak Securities among others. 

    Meanwhile, BNPL is inflexible in terms of the repayment schedule and components like interest cost and processing fee make it an expensive approach at times. At times, the interest cost could be as high as 15-20 per cent if the repayment schedule is disturbed. 

    Not to forget, that there are no real incentives in the form of cashback or savings, and in fact could lead to overspending as well since lenders are more than happy to dole out loans for discretionary spending by consumers. 

    But, BNPL has its share of advantages as well, especially for those who need to make a purchase instantly but are running low on cash. 

    Under BNPL, the borrower gets the option of an instant, short-term loan with a deferred repayment tenure, including the option for equated monthly instalments (EMIs) after the end of an interest-free period. 

    Also read: BNPL vs Credit Cards: What happens when you default on payment

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