In the midst of the payment technology revolution, Buy Now, Pay Later (BNPL) is the fastest-growing online payment method in various places including, the UK, US, Australia, and more.
This trend is growing in popularity, especially among millennials, who tend not to keep credit cards. Many experts believe this payment solution is expected to triple over the next couple of years.
At present, many fintech companies are enabling a new kind of consumer behaviour, normalising the use of PoS loans (buy now and pay later scheme) for everyday purchases. Based out of Stockholm, Klarna is one such company that gives customers the freedom to choose how and when to pay.
Secured £721M funding
As we reported a few days back, the Swedish company has secured $1 billion (approx £721 million) in an equity funding round to accelerate international expansion and further capture global retail growth.
The oversubscribed round included a combination of new and existing investors and, closed at a post-money valuation of $31 billion (approx £22.3 billion), making Klarna the highest-valued private fintech in Europe and the second-highest worldwide.
Sebastian Siemiatkowski, co-founder and CEO of Klarna: “At Klarna, we solve problems – that is the heart of what we do for both consumers and retailers. Consumers want transparent products to help them bank, shop, and pay that reflect the way they live their lives, not just outdated traditional models. Each and every one of us at Klarna will continue to work hard on this, but it is also time for us, with our culture of change, disruption, and innovation, to focus on tackling bigger, more complex issues. I believe our industry has a responsibility to help in some way solve global sustainability issues and I hope others will join Klarna in our ambition.”
In 2020, the company witnessed 46% and 40% YoY growth in volume and revenue to more than $53 billion and $1 billion respectively.
Pledges 1% of the capital
The company has announced an initiative under which it will pledge 1% of the capital raised to focus on key sustainability challenges globally. The initiative will be formally launched on April 22 on World Earth Day, says Klarna.
The journey to fintech success!
Sebastian Siemiatkowski started his working life early at 15 in Uppsala at Burger King, where he met Niklas Adalbert. They both instantly hit-off and began discussing ideas. Siemiatkowski started Klarna in 2005 with Niklas Adalberth, along with Victor Jacobsson, who he met later while studying at Stockholm School of Economics.
The three men in their early twenties started Klarna with the idea of offering consumers to pay the bill for goods after receiving them. Even though consumers were a bit hesitant to shop online then, it’s a whole new different story now.
Before the purchase, Klarna analyses a person’s credit history and browsing behaviour to determine if they are creditworthy. Upon gaining the trust of consumers, the three co-founders started the journey of convincing retailers to take up their service, one by one.
The Swedish company began to strike deals with global retailers like Ikea, Adidas, Zara, and others including, UK fashion retailer iSmash, which runs 26 shops in London, Manchester, and Leeds. According to Siemiatkowski, the potential to boost sales is the reason why retailers take up their service.
Active in 17 countries
The company offers direct payments, pay after delivery options, and instalment plans in a one-click purchase experience. Currently, Klarna has more than 250,000+ retail partners including Macys, Etsy, Sephora, Ralph Lauren, and Urban Outfitters.
Klarna has over 3,500 employees and is active in 17 countries. Klarna has been backed by Sequoia Capital since 2010 and more recently, Dragoneer, Bestseller Group, Permira, Visa, Atomico, Ant Group and Silver Lake, HMI Capital, TCV amongst others.
Like Klarna, many other companies have adopted the model, rehashed it, customised it, and thrived in the UK’s BNPL payment industry. Let’s take a look at these Klarna alternatives from the British landscape.
Founder/s: Philip Belamant
Zilch is the new fintech of the UK. Born in London in 2018, it’s unique “Over-The-Top” platform is the first of its kind in the fast-growing Buy Now Pay Later (BNPL) space.
By taking accountability for its customers, Zilch removes the anxiety associated with credit. It’s proprietary data-driven credit assessment technology focuses on optimising its users’ cash flow whilst preventing over-indebtedness. Zilch is growing rapidly with quarterly growth exceeding 200% and monthly registrations now at over 30,000.
Unlike other players in the BNPL space, Zilch’s merchant agnostic proposition offers its users unrestricted access to the entire online retail space, so they can shop wherever they choose to do so.
Founder: Nick Molnar and Anthony Eisen
Clearpay is another global leader in the ‘Buy Now, Pay Later’ space that offers interest-free instalments payments at top fashion, beauty, and lifestyle retailers in North America, U.K., Australia and New Zealand.
Founded in 2014, Clearpay was built as a retail company (not a finance company) to connect the world’s leading brands to new customers. In 2016, Clearpay debuted on the Australian public market, and today is a top 20 ASX company, based on market valuation. In 2017, it merged with Touchcorp to elevate its customer offerings and service levels. In 2018, the company launched in the US market. In 2019, the company launched in the UK market, with the Clearpay name. In June 2020, hit 1 million active customers in the UK market. Launched in Canada. In 2021, Clearpay is looking to expand to new markets in Europe, including Spain, Italy and France.
Founder/s: Robert Flowers
Founded in 2015, DivideBuy aims to make life more affordable by transforming the point-of-sale (POS) finance industry through innovation and technology. Its eCommerce credit plugin integrates with shopping cart functionalities such as Shopify, Magento, WooCommerce and Craft Commerce to offer interest-free credit through retail partners.
Currently, in partnership with over 500 retailers, DivideBuy offers a fast 60-second application process and an immediate decision which means that customers can spread the cost of their purchases with no hidden charges. By offering an alternative payment method to customers, retailers can benefit from increased average basket values and reduced basket abandonment. Further, the UK LendTech also scored first place on Deloitte’s UK Technology Fast 50 2020 list. The Newcastle-under-Lyme based company reported an average three-year growth rate of 20,733% to the year 2019/2020.
Founder/s: John Talbott, Madeline Parra
Purple Dot is a payment plug-in like Klarna or Clearpay that doesn’t encourage consumers into debt, instead offering a ‘worth-the-wait’ price. It lets consumers request a fashion item at a price slightly below the RRP – brands can then determine whether to sell a product at that rate over a 1 to 8 week waiting period (this is the ‘worth-the-wait’ option).
Founded in August 2019 by senior Skyscanner employees Madeline Parra (CEO) and John Talbott (CTO), Purple Dot is helping fashion brands tackle wasted inventory, drastic sales tactics, and the profit erosion that comes with it. The London-based startup is backed by Connect Ventures, AI Seed, Moxie Ventures as well as prominent angel investors.
Payl8r is a flexible, and modern method of paying for goods & services online and in-store. The Manchester-based company offers an alternative to credit cards that does not burden the consumer with debt or fees. Payl8tr works with several training providers, travel companies, and tattoo studios among its partner merchants.