Klarna takes on banks with debit card as it diversifies beyond buy now, pay later

Klarna, the Swedish fintech renowned for its 'buy now, pay later' services, is taking a significant step in its evolution by introducing a Visa debit card. This initiative is part of the company’s strategy to broaden its offerings beyond its traditional short-term credit products. Announced on Tuesday, the Klarna Card is currently being piloted with select customers in the U.S., with plans for a nationwide launch in the near future. Europe can expect similar rollouts later this year. This move is indicative of Klarna's ambition to transform its reputation from the face of the buy now, pay later (BNPL) trend to a more comprehensive banking entity, especially as it gears up for a much-anticipated initial public offering (IPO). BNPL services allow users to make interest-free payments over time, and Klarna aims to diversify its image as a neobank. CEO Sebastian Siemiatkowski expressed the company’s desire to shift public perception, stating, "We want Americans to associate us with not only buy now, pay later, but also with a PayPal-like wallet experience and our neobank services." The Klarna Card offers an account capable of holding FDIC-insured deposits and facilitating withdrawals, akin to traditional checking accounts. What sets it apart is its integration with Visa Flexible Credential, which enables users to access various funding sources—debit, credit, and BNPL—using a single card. While primarily functioning as a debit card, it also allows users to select Klarna’s 'pay later' options, such as 'Pay in 4' and 'Pay in 30 Days.' As Klarna ventures further into the competitive consumer banking landscape, it faces established giants like JPMorgan Chase and Bank of America, along with rising fintech challengers such as Chime. Despite holding a full banking license in the European Union, Klarna currently does not possess a bank license in the U.S. Nevertheless, it has secured a partnership with WebBank, a small financial institution in Salt Lake City, Utah, enabling it to provide FDIC-insured accounts.