Klarna teams with CommBank to launch Afterpay rival, stoking a fresh buy-now-pay-later battle

Get ready for a new battle for your buy-now-pay-later business: a cashed-up bank with investors including Snoop Dogg and CommBank is taking on Afterpay.

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Online shoppers should brace for a new wave of buy-now-pay-later offers after Australia’s largest bank partnered with a cashed-up Swedish provider to take on the likes of Afterpay, Zip Money, and Latitude.

The Commonwealth Bank launched Klarna’s new pay-later and ”ghost cards” schemes inside its popular banking app in Australia today, also revealing it bought a $445 million stake in the company that boasts Snoop Dogg as an investor and ambassador.

CommBank’s announcement arrived just one day after the release of a new financial code of conduct for the growing market of credit providers, who have been criticised for loaning young, poor consumers money without checking whether they can repay the funds, and taking advantage of “gaps” in lending laws.

Global payments provider Klarna has announced plans to launch services in Australia, with backing from the Commonwealth Bank.

Klarna chief executive Sebastian Siemiatkowski, in Sydney for the service’s launch, admitted the buy-now-pay-later market was crowded but said his $5.5 billion firm would offer consumers new options.

“Some people say, ‘well, there are so many buy-now-pay-later companies here already’ and I feel like we’re coming to the market with something completely different that doesn’t exist today. We think there’s an appetite for it here,” he said.

“Consumers have been limited to the merchants they work with, for example. You can use this anywhere, which is really important.”

Shoppers who sign up to Klarna can visit online stores within its app, create “ghost cards” that act as prepaid debit cards to buy goods, and choose to pay their purchases off in instalments.

Mr Siemiatkowski said Klarna customers would be subject to credit checks, and some may not be able to use the service.

“This industry is not famous for really caring about its customers and being approachable,” he said.

“We have a very long-term perspective on what we are trying to do. We do a credit check on every customer, which is a data point to ensure we are being thoughtful about the usage of the product.”

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Rapper Snoop Dogg starred in an ad for Klarna, a Sweden-based bank.

Research by Roy Morgan found 1.95 million Australians used buy-now-pay-later schemes in the year to September 2019; more than half a million more people than a year before.

The schemes were most often used by young consumers on low or average wages, the study found, and chief executive Michele Levine said the new payment technology posed a serious “threat to traditional deferred payment options including credit cards,” which had already begun falling in use.

“Consumers will come to expect the minimum effort when making payments and the industry will need to adapt by providing more innovative and simple solutions,” she warned.

The Reserve Bank of Australia has also expressed concern about the economic impact of schemes such as Afterpay, Latitude, Openpay, Brighte and Zip Money, with an internal memo revealing they had “yet to be tested in a downturn,” exploited “gaps” in financial laws, and consumers may not “understand the risks” of using the services.

But the Australian Financial Industry Association launched a new code of conduct for the industry on Wednesday that will see changes to some providers.

They include a cap on late fees, provision to freeze costs in cases of financial hardship, and limiting services to users over 18 years.

Originally published as Klarna teams with CommBank to launch Afterpay rival, stoking a fresh buy-now-pay-later battle