Klarna Secures Exclusive Walmart Partnership, Replacing Affirm in the BNPL Market

A Strategic Shift in Buy-Now-Pay-Later Services

Swedish fintech giant Klarna has strengthened its foothold in the U.S. market with an exclusive deal to become Walmart’s buy-now-pay-later (BNPL) provider, replacing Affirm. This move not only reshapes the competitive landscape of BNPL services but also comes at a crucial time for Klarna as it prepares for its highly anticipated initial public offering (IPO).

Under the partnership, Klarna will offer installment loans to Walmart customers, both online and in-store. These services will be integrated through OnePay, Walmart’s majority-owned fintech platform, which was recently rebranded from “One.” While OnePay will serve as the primary user interface, Klarna will be responsible for underwriting loans with terms ranging from three to 36 months, carrying annual interest rates between 10% and 36%.

The new BNPL service is set to roll out in the coming weeks and is expected to be fully implemented across all Walmart channels by the holiday season, positioning Klarna as Walmart’s exclusive BNPL provider by year-end.

A Major Setback for Affirm

Affirm, Walmart’s BNPL provider since 2019, now faces a significant challenge. The announcement of Klarna’s partnership sent Affirm’s stock tumbling by 4.2%, with intraday losses reaching up to 14%.

Affirm has long relied on high-profile partnerships with retail giants like Amazon, Shopify, and Target to drive its growth. However, losing Walmart—a key client dubbed a “crown jewel” by Affirm’s Chief Revenue Officer, Wayne Pommen—places the company under mounting pressure, especially amid market volatility affecting tech stocks.

In response to the development, an Affirm spokesperson stated:
“We win business when merchants want superior performance and maximum value, given our underwriting and capital markets advantages. We will continue our long-term strategy of competing on our products and entering into sustainable partnerships.”

Despite this reassurance, Affirm now faces a crucial moment to reassess its growth strategy in the competitive BNPL industry.

Klarna’s IPO Plans Gain Momentum

The Walmart deal comes at a pivotal time for Klarna, which has filed for an IPO in the U.S., targeting a valuation of $15 billion—just below Affirm’s current market capitalization.

Klarna’s valuation soared to $46 billion in 2021 before plummeting by 85% the following year due to a broader downturn in fintech stocks. However, CEO Sebastian Siemiatkowski has worked to stabilize Klarna’s financial standing, leveraging artificial intelligence to cut costs and streamline operations.

Klarna returned to profitability in 2023, reporting a net income of $21 million, a stark contrast to its $244 million loss the previous year.

Siemiatkowski called the OnePay partnership a “game changer” in a statement:
“Millions of people in the U.S. shop at Walmart every day, and now they can shop smarter with OnePay installment loans powered by Klarna. We look forward to helping redefine checkout at the world’s largest retailer both online and in stores.”

As part of the deal, Walmart’s OnePay has been granted the option to acquire a stake in Klarna. Klarna’s IPO filings indicate that it has issued warrants for over 15 million shares at an average price of $34 per share to a “global partner,” which sources confirm is OnePay.

Walmart’s Fintech Ambitions and the Growth of OnePay

For Walmart, the Klarna partnership is a key step in expanding its financial services. OnePay, Walmart’s fintech division, has experienced rapid growth, reaching a $2.5 billion valuation and amassing over 3 million active customers.

With more cash-strapped consumers turning to installment loans, Walmart aims to integrate BNPL services into a broader ecosystem of financial offerings, including banking, savings, and payments.

According to the Federal Reserve Bank of New York, Americans held a record $1.21 trillion in credit card debt in Q4 2023, a $441 billion increase from 2021. This trend highlights the growing demand for alternative financing solutions like BNPL.

OnePay CEO Omer Ismail emphasized the importance of accessible credit, stating:
“It’s never been more important to give consumers simple and convenient ways to access fair credit at the point of sale. That’s especially true for the millions of people who turn to Walmart every week for everything.”

Looking ahead, OnePay is reportedly considering launching a OnePay-branded credit card, developed in partnership with a new banking institution, following Walmart’s successful exit from its previous credit card collaboration with Capital One.

The BNPL Market Shake-Up

The BNPL industry has witnessed explosive growth, with Klarna, Affirm, and Afterpay vying for market share. Klarna’s exclusive deal with Walmart marks a major shift in the sector, likely impacting consumer choices and competitive dynamics.

As Klarna moves closer to its IPO, its U.S. expansion—fueled by Walmart’s backing—positions it as a formidable challenger to Affirm. Meanwhile, Walmart’s OnePay is quickly emerging as a key player in the digital finance space.

With Klarna gaining momentum and Walmart doubling down on fintech, the battle for dominance in BNPL services is far from over.

For feedback: contact the BATV Editorial Division at: info@batvja.com