Klarna, CBA enter the buy-now, pay-later fray

The chief of Swedish online bank Klarna will visit Australia soon to take on local buy-now, pay-later outfits Afterpay and Zip.

Sebastian Siemiatkowski, chief executive and co-founder of Klarna. Picture: Bloomberg

The chief of Swedish online bank Klarna will visit Australia in late January to kick off its partnership with Commonwealth Bank and spearhead plans to take on local buy-now, pay-later outfits Afterpay and Zip.

Klarna co-founder and chief executive Sebastian Siemiatkowski will reveal the payment group’s local plans on January 30, including what products it will release here and when.

The local rollout, which closely involves CBA, has been kept under wraps but the formal launch is expected to occur early in the first quarter.

The Australian foreshadowed in October that Klarna and CBA were plotting a first quarter 2020 launch to take on the incumbents Afterpay and Zip in the local instalments industry.

Earlier this week, Klarna appointed former Zip sales manager Francine Ereira as its Australia and New Zealand boss. She steps into the role in February.

Mr Siemiatkowski said Ms Ereira’s appointment would accelerate the company’s global expansion, which included the US and Britain.

“The combination of her strategic leadership and operational experience in the fast-growing digital and payments sector in Australia will be a huge asset to our global team,” he said.

“As Klarna continues to grow rapidly across markets, we are excited to bring new innovative services to Australian consumers and add real value to all our merchant partners to further help unlock potential so they can compete effectively.”

The buy-now, pay-later sector has been in the regulatory spotlight locally and in the US in the past six months.

ASX-listed Sezzle this week said it was in negotiations to resolve issues around the granting of a Californian Finance Lender Licence in the US. That followed a decision in December by US regulators to decline approval for the application.

Klarna has held the appropriate licences in the US since 2015.

The Swedish group has a treasure trove of high-profile backers, including rapper Snoop Dogg, Sequoia, Bestseller, Permira, Visa, H&M, Atomico and Blackrock.

CBA got involved when it participated in a global equity raising of $US460m in August 2019, contributing $US100m.

That raising gave Klarna a post-money valuation of $US5.5bn, making it the largest private fintech firm in Europe.

Some industry players are welcoming the arrival of Klarna to Australia while others say Afterpay and Zip have a notable headstart over the group.

Klarna partners with more than 190,000 merchants in Britain, North America and Europe including H&M, Michael Kors, Adidas, Ikea, Expedia, Sephora, Samsung and Microsoft.

Ms Ereira said Klarna had a “proven track record of shaking up the payments industry”.

“It’s incredibly exciting to be joining such a disruptive and high-growth company which continues to build superior relationships,” she said.

A UBS report on Afterpay, released last year, identified Klarna’s tie-up with CBA as a potential threat but also highlighted counter moves by MasterCard, American Express and Visa.

UBS said Afterpay was vulnerable to competition due to a “relatively low level” of upfront investment and low barriers to entry. UBS did note, however, that Afterpay had a significant first-mover advantage.

Klarna was founded in 2005. The group says it has 80 million consumers and a year-on-year growth rate of 36 per cent.