Klarna: The BNPL Brand looking for a Blockchain Boost

85 million users, $100 billion in yearly transactions and 500k+ merchants. Klarna has grown into a global Buy-Now-Pay-Later (“BNPL”) giant and CEO Sebastian Siemiatowski recently announced that the fintech platform plans to integrate crypto-offerings into their services. This potential expansion squarely aligns with the company’s upcoming IPO, valued at $15 billion.

Siemiatowski’s U-turn on the crypto industry stands in sharp contrast to his views in 2022 when he described Bitcoin as a “decentralised ponzi scheme”, before admitting his ignorance about Bitcoin mining and its supply cap. His shift in perception, 3 years later, encapsulates the broader mood and emerging shifts within the fintech and traditional finance industries, offering a microcosm of the wider state of play.

With the CEO opening to floor on X to suggestions about how to integrate cryptocurrencies and blockchain into Klarna’s BNPL business model, we take a look at a few of the options below.

1.     Launching Klarna’s own stablecoin

Klarna’s custom stablecoin would need to be pegged to a stable asset like a fiat currency (US dollar or Euro) or a basket of assets (to reduce volatility). This ensures the value of the coin remains stable, providing predictability for both consumers and merchants. Customers could use this stablecoin to pay for their purchases, make instalment payments or convert it back to fiat currency to settle transactions in a seamless ecosystem experience.

The blockchain could issue and manage the stablecoin, and smart contracts within the blockchain could automate BNPL payments and instalments, which would alleviate Klarna from having to chase customers for non-payment.

Though ideal in theory, fellow fintech provider PayPal attempted this to limited success. PayPal introduced PaypalUSD in 2023 marking their foray into the crypto industry. However, they have found it hard to compete with and scale against, stablecoin behemoths USDT and USDC, both sitting at a combined total of a $180 billion market capitalisation; while PaypalUSD holds a $500 million market capitalisation.

2.     Integrating USDC or USDT stablecoin

Another idea would be to integrate existing stablecoins into its business model. It would have all the benefits associated with option 1, including avoiding the need to have an independent stablecoin scaling strategy and the need to jump through regulatory hurdles for new coins.

Head of Production and Technology at Circle, Nikhil Chandok, is among the proponents of this idea. This would also allow Klarna to process transactions through existing blockchain platforms, and process payments faster than they are currently able. Chandok, also went as far as suggesting the addition of in-app wallets, allowing users to make payments directly to merchants.

However, the main downside to this option is having to rely completely on a third-party stablecoin issuer.

3.     Introducing Decentralised Finance (DeFi) lending

Some suggestions on X included partnering with DeFi lending platforms to allow consumers to access decentralised loans or flexible payment options using crypto. For example, users could secure loans by staking or collateralising digital assets like Bitcoin or Ethereum, and Klarna could offer these loans as part of their BNPL service.

However, this would directly contradict Klarna’s underlying business model. Klarna’s system relies on consumer trust to make later payments while DeFi loans are collateralised. Additionally, DeFi, by its nature is decentralised, there is no central authority, and control is distributed. Integrating a decentralised system could undermine Klarna’s role as intermediary between consumers and merchants. Would Klarna mind it? Perhaps not, but we do not know for now.

Conclusion

Although Klarna’s entry into the crypto industry is being dubbed ‘late’ within fintech circles, Siemiatowski has the luxury of applying the lessons learned by those before him. With the Swedish giant’s IPO looming, it remains to be seen how Klarna plans to integrate crypto into its offering. It will be interesting to follow the company’s progress as they navigate the ecosystem, trying to position itself at the forefront of the new frontier of finance.

If you have any queries about blockchain technology and cryptocurrency, please do not hesitate to get in touch by telephone on 0207 052 3545 or by email info@kaurmaxwell.com

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice.

Please contact KaurMaxwell for advice before taking any action in reliance on it. 

By: Shennind Awat-Ranai and Rishaa Patel