Klarna is a fintech company based in Sweden that is known for “buy now, pay later” (BNPL) services, peer-to-peer payments, and sending funds.
The company, headquartered in Stockholm, Sweden, was founded in 2005 by Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson.
If you’ve been paying attention to the financial world over the last few years, you’ve definitely heard of Klarna—the giant of installment payments in Europe. Customers can use Klarna to shop at third-party partner merchants and pay at the point of sale.
Upon choosing Klarna as the payment method, the item’s price will be paid by the customer in installments over their preferred period using their card, bank account, or other payment options.
Klarna, like many other BNPL platforms, allows users to divide loan payments into four installments. In addition, the company boasts of its interest-free service and promises no fee for late payments. Klarna also provides a variety of credit terms, ranging from 14 days to three years, depending on the amount.
Along with the “buy now, pay later” service, Klarna offers an in-app shopping page where customers can browse various goods from partner merchants. Customers can also shop on third-party apps and pay with Klarna later. Recently, the company has also launched the Klarna Card. Powered by Visa, the card lets holders pay for products and bills offline and overseas.
In case you're curious: this is how Klarna makes money
Klarna has grown a lot since its humble beginnings. At first, the founder of Klarna started the company in the hopes of winning an annual business competition held in Stockholm and acquiring enough capital. Although the startup did not win the competition, the founders were able to secure enough funding to get the firm going.
Despite the unfortunate outcome of Klarna’s business competition in Stockholm, the company was destined to succeed when a prominent Swedish investor, Jane Walerud, met Klarna’s founders at a networking event. With 600,000 euros at hand and five software developer partners, the founders proved that the concept behind Klarna is not at all impossible.
It only took half a year before the company started to earn profits. And after five years of operations, Sequoia invested in the company, making Klarna the first European tech startup to earn investment from the said company. From there, Klarna continued to grow.
The company’s launch in the United States in 2015 was the platform’s breakthrough, establishing Klarna as one of Sweden’s five unicorn companies alongside Mojang, Spotify, King, and Skype. Despite its success, it’s only in 2022 that Klarna reports to consider its IPO, with an estimated value of $50 billion.
Currently available in 45 countries, Klarna recorded more than 147 million active users and 400,000 partner merchants in 2021. With the company’s intensive penetration of the US market, they closed the year with 20 million active accounts in the country.
Klarna’s revenue peaked at $1.6 billion from more than $80 billion in transaction volume in 2021. With the company’s continuous expansion, reports say Klarna had over 4,000 employees. Recently though, Klarna reported it raised $800 million in fresh funding from investors at a $6.7 billion valuation. That is down from the $45.6 billion value secured in 2021.
The methodology by which competitors of Klarna are ranked is based on various data points. Information such as the revenue generated, the company’s funding, transaction volume, the number of employees, the number of partner merchants, the number of available countries, and anything else relevant is being taken into account.
This analysis, to ensure comparability, only looks at the “buy now, pay later” competitors of Klarna. Therefore, competition in its shopping app, peer-to-peer transfer, and credit/payment card lines is not considered (although some below-listed companies also operate in those industries).
Additionally, companies that Klarna (partially) owns are included as well. In September 2017, for example, it completed the acquisition of the German company Billpay for $75 million. Still, it continued to compete against it in the Netherlands, Germany, Austria, and Switzerland.
Lastly, this analysis does not include indirect competitors of Klarna. Examples include savings banks, online banks, lending firms, e-wallets, and many other financial services.
So, without further ado, let’s take a closer look at the top 8 competitors of Klarna.
1. Afterpay
Headquarters: Melbourne, Australia Founder(s): Nick Molnar, Anthony Eisen Year Founded: 2014
Afterpay is a BNPL company headquartered in Australia. They serve international markets, including the US, UK, Canada, and New Zealand. In 2017, Afterpay entered into a merger with Touchgroup, another Australian fintech company—a year after the company had its 500-million-dollar IPO in Australia.
After the company’s breakthrough in 2018, Afterpay took 90% ownership over Clearpay, a competitor in the UK. Within two weeks, the platform gained over 200,000 users, solidifying Afterpay’s presence in the UK.
Like Klarna, Afterpay does not impose a specific credit score required for a loan. However, unlike Klarna, Afterpay doesn’t check its customers’ credit scores, implying a more favorable process. In addition, Afterpay doesn’t report credit delinquency to the authorities, so using the platform isn’t likely to affect your credit history.
Following the COVID-19 pandemic, Afterpay recorded another significant growth spurt. Online stores and “buy now, pay later” platforms have become popular as in-store shopping becomes less appealing.
With the growing interest in BNPL services, many doors have opened for Afterpay, including expansion to Asia—with the acquisition of Indonesian fintech, EmpatKali. In August 2021, Afterpay was acquired by the US fintech Square (now Block) for $29 billion.
The company completed 2021 with funding worth more than $375 million and over AU$924 million in revenue. Afterpay has carried out more than AU$19.7 billion in transactions, mainly from BNPL and cash services.
As of 2021, Afterpay reportedly has 10 million users and 55,000 participating merchants across 40 countries worldwide. The latest reports also say that Afterpay employs more than 1,300 people.
2. Affirm
Headquarters: San Francisco, California Founder(s): Nathan Gettings, Jeffrey Kaditz, Alex Rampell, Max Levchin Year Founded: 2012
Affirm is a “buy now, pay later” company headquartered in the United States. Founded by a team of entrepreneurs in the US, Affirm was initially a part of the startup studio, HVF. Initially called Expedite, the platform was renamed Affirm in 2013.
Max Levchin, one of the company’s founders, is also a co-founder of the fintech giant Paypal. Inspired by the latter’s success, Levchin decided to create another fintech startup but focused on lending services instead.
Affirm’s primary method of attracting customers was by tapping on sellers to sign up. Only in 2017 was the company able to release an app that brought Affirm directly to consumers.
Talks about Affirm going public first surfaced in 2020. However, NASDAQ prices rose, causing Affirm to back down. Notwithstanding, it only took Affirm a month to raise additional funds for the IPO. After only 8 years of operation, Affirm was finally listed on NASDAQ stock exchange in January 2021, raising over $1.2 billion.
While Klarna splits the bill into four interest-free payments, Affirm allows the customers to decide how much they will pay within the next 3 to 36 months, depending on the approved period. Not only does it give the customer more freedom in their finances, but it also provides a much more extended payment period for large loans.
Some of the company’s partners are Shopify, BigCommerce, Walmart, and Zen-Cart. In addition, Affirm is also the contracted BNPL partner of Amazon until 2023.
The company has yet to conduct an expansion, as its services are only available in the US. However, Affirm did acquire Canadian BNPL competitor PayBright for CA$340 million back in December 2020.
In 2021, Affirm reported more than $8.3 billion worth of completed transactions within the app. The company’s activities had garnered $871 million in revenues the same year. In addition, Affirm has also raised more than $1.5 billion in funding.
Overall, Affirm closed the year 2021 with about 29,000 partner merchants and 7.1 million active users. As of 2021, Affirm’s employee count is estimated to be more than 2,000.
Sources: Affirm Annual Report, Affirm News, CNBC Disruptor 50, PYMNTS, Wall Street Journal
3. Sezzle
Headquarters: Minneapolis, Minnesota Founder(s): Charlie Youakim, Paul Paradis, Killian Brackey Year Founded: 2016
Sezzle is another BNPL company based in the US. Though also available in Germany, France, Austria, Belgium, the Netherlands, Italy, Spain, and the UK, its presence is strongest in its North American market, specifically the US and Canada.
Charlie Youakim, the company’s co-founder and current CEO, was a former executive of Passport Parking, a transportation and parking payment solutions company. Sezzle was first launched as an ACH payment platform. The increasing demand and popularity of the BNPL industry then led to the establishment of Sezzle as a US digital lender.
Sezzle went public in 2020, becoming the first BNPL company to do so. And although they tried to test their luck in India, Sezzle had to shut it down too soon in 2022. They decided to expand to Brazil instead.
Unlike many BNPL companies, Sezzle decides on the customer’s credit terms. That means customers cannot choose how long the loan will be and how much they can pay each billing period. The upside is that Sezzle offers a wide range of categories to shop from.
As of 2021, Sezzle has over $118 million worth of funding. In the same period, they reported a revenue of $99 million earned from more than $1.8 billion in transaction volume. Early in 2022, with a value of $491 million, the company announced a merger with Australia’s Zip Co. However, the merger was terminated five months later.
The platform reportedly has over 8 million users in its market countries, with 3.4 million BNPL debtors. They have about 47,000 partner merchants in 8 countries, while the company’s employee base is estimated to be equal to around 540.
Sources: Cision, Finextra, Sezzle Annual Report, Sezzle EU Support, Sezzle Brazil
4. Visa
Headquarters: San Francisco, California Founder(s): Dee Hock Year Founded: 1958
Visa is a financial services giant based in the US. Although they are known for their EFT and ATM cards, Visa has also penetrated the BNPL industry recently. With an almost identical structure between credit card services and the “buy now, pay later” system, Visa decided to open its own BNPL service, dubbed Visa Installments, in 2019.
With the increasing popularity of BNPL, it’s no wonder why Visa opted to adapt and expand its services. Although Visa remains among the few trillion-dollar earners, the dramatic increase in BNPL companies’ gross domestic value threatens traditional credit cards.
A year after the BNPL release, Visa established partnerships with various companies in North America, Asia, and other jurisdictions. Their collaborators include CIBC, Equinox Payments, ScotiaBank, Versapay, GHL Systems Malaysia, Quest Payment Systems, Home Credit Bank, Cybersource, and more. In 2021, Visa signed a deal with Klarna to help it expand to more markets.
Currently, Visa’s BNPL service is only available in the US, Canada, Australia, Russia, and Malaysia. The BNPL service allows Visa cardholders to purchase items through loans. But unlike using credit cards, Visa’s BNPL lets merchants have the credit available to customers at the point of sale. Customers also don’t need to submit credit checks or applications to Visa.
Like other BNPL companies, Visa Installments lets their customers split the bill into four equal installments. But in using Visa Installment, customers are not only given the option to take a loan at the point of sale, but they also have the option to have credit before pre-purchase. In addition, cardholders may also convert their recent credit card payments into installment payments.
Visa made an app available to let BNPL customers plan their next purchases. In the app, you can decide on the duration of your loan, shop at partner merchants, and manage fees and interest. They also have an app for merchants to let them plan their credit terms for customers.
In 2021, Visa reported $13 trillion worth of payments and transactions, including their other ventures. Their net revenues peaked at $24 billion. As the year closed, Visa was estimated to be worth more than $82.9 billion. However, earnings on each service (including BNPL) were not disclosed.
Since Visa Installments is relatively new in the business, it had only about 300 partner merchants by the end of 2021. However, with Visa Card’s 100 million partner merchants worldwide, customers living in Installments’ available territories can technically use BNPL in all Visa card-using stores by converting the credit into installment plans. As of 2021, Visa reported over 21,500 employees.
Sources: Payments Dive, PYMNTS, Seeking Alpha, Visa Individuals, Visa Investor, Visa News, Visa Partner Directory
5. Zip
Headquarters: Sydney, Australia Founder(s): Larry Diamond, Peter Gray Year Founded: 2013
Formally known as Zip Co Limited, Zip is a “buy now, pay later” platform headquartered in Australia. In its early stages, it marketed itself under ZipMoney before changing to Zip Co Limited in 2017.
After three years of operation, the company was listed on the Australian Securities Exchange, raising more than $5 million. One of their first and most important partners is the Australian budgeting platform Pocketbook, which they acquired for $7.5 million. But due to a lack of user interest, Pocketbook was ultimately shut down in 2022.
In 2018, the company made the Zip app available on Google Play Store and Apple Store, which has earned them more than a million downloads from each platform. In the first week of 2022, Zip has joined Klarna, Afterpay, Affirm, and Sezzle in the top 5 BNPL apps regarding downloads and ratings.
Two years later, Zip sealed a deal to acquire QuadPay, a New York-based fintech company working in the same industry. This escalated the two companies’ combined worth to $1 billion and helped Zip penetrate the US market. A year later, the QuadPay app was rebranded as Zip.
Aside from offering zero interest, Zip is also not so strict about credit checks. So, people of legal age with an approved debit/credit card can quickly get their loans approved on the platform. Zip splits the customer’s bill into four installments, paid within six weeks. Depending on the customer’s preference, repayments can be made every fortnight, week, or month.
As of 2021, Zip has an estimated worth of US$2.91 billion. In addition, their revenue has peaked at more than AU$397 million, while the reported volume of transactions was worth about AU$5.8 billion.
Zip recorded 7.3 million users in 2021, with markets in Australia, the US, Canada, Czech Republic, Mexico, India, Philippines, New Zealand, Poland, Saudi Arabia, UAE, South Africa, and the UK. Zip has more than 51,000 partner merchants and more than 1,500 employees.
Sources: Moneymag, PYMNTS, Zip Annual Report, Zip App
6. PayPal’s ‘Pay in 4’
Headquarters: San Jose, California Founder(s): Max Levchin, Peter Thiel, Luke Nosek, Ken Howery, Yu Pan Year Founded: 1998
PayPal is a well-known fintech giant that has been around for more than 20 years. Although more popular as an international digital wallet, PayPal has also introduced its own BNPL, known as PayPal’s Pay in 4, in June 2022.
As the name suggests, PayPal’s BNPL works by allowing customers to take items at the point of sale through a loan, which will then be paid in four instalments. The term, which depends on the customer’s preference, can range from 6 months to 2 years. Although they made it clear that payments are made every two weeks, PayPal doesn’t charge additional fees for late payments.
In many reviews, PayPal has often received critical comments about the relatively stricter policies on signing up. Specifically, they prompt users to choose between a personal or business account. In addition, due to the BNPL offering being new, it’s only available in limited regions.
On the plus side, PayPal has democratized its policy, allowing customers to choose the frequency of payments (every two weeks or every month) with no additional charges. However, PayPal doesn’t yet release any disclosure when it comes to late payments.
Although PayPal does not disclose earnings and other figures in each venture they operate, it’s reported that around 70% of PayPal’s customers also used the platform’s instalment feature in 2021. During the same period, PayPal BNPL recorded over $3.6 billion worth of transaction volume.
The platform’s “buy now, pay later” feature is only available in the US, UK, Germany, France, Italy, Spain, and Australia. As of 2021, PayPal has 1.2 million partner merchants with PayPal BNPL transactions and employs almost 40,000 people.
Sources: Insider’s Intelligence, Paypal Annual Report, Paypal BNPL, PYMNTS
7. Splitit
Headquarters: New York City, New York Founder(s): Gil Don, Alon Feit Year Founded: 2012
Like others on the list, Splitit is a platform that allows customers to “buy now, pay later” by lending funds at the point of sale. Splitit, which was founded in 2012, went public in 2019. As with many BNPL services, Splitit offers zero interest, which is only applicable for particular credit terms. How long the loan lasts will depend on the customer’s preference.
Aside from zero interest, they aren’t so strict regarding the customer’s credit score and history. Therefore, signing up and getting loans approved are generally easy. Whereas many BNPL services focus on B2C (business-to-consumer) transactions, Splitit targets a business-to-business context, tailoring its features to the needs of suppliers and businesses.
Splitit has been working hard in recent years to become the leading “buy now, pay later” platform for businesses and suppliers. One feature that makes it suited for business-to-business transactions is that both parties agree upon the credit terms. However, there has been negative feedback about the app’s speed.
In addition, Splitit is also known for its card-based service. It lets customers have loans using their credit cards. Many users, especially businesses, find this helpful as there’s no need to request loans from the bank.
With Splitit, customers can split the bills in 3 to 24 installments. The first installment becomes the down payment, and the rest will be automatically deducted from the customer’s credit card. In addition, merchants can receive payments through Splitit Pay, which they can connect to their store on any e-commerce platform.
In 2021, Splitit reported a $396 million transaction volume, with revenues reaching around $10.5 million. In addition, the company recorded more than 330,000 active shoppers who transacted with over 3,000 merchants. Splitit was estimated to have had no more than 200 employees during the same period.
Sources: Business Insider, Cision, Crunchbase, LinkedIn, Splitit Annual Report
8. Clearpay
Headquarters: Manchester, United Kingdom Founder(s): Mark Sicola Year Founded: 2017
Founded in 2017, Clearpay is an international BNPL company well-known in the UK. In 2018, Afterpay signed a share purchase agreement with ThinkSmart Ltd. to acquire a 90% stake in ClearPay for global expansion, raising AU$117 million.
The said acquisition earned Afterpay most of the rights over Clearpay, except its intellectual property. The platform is still known as Clearpay in the UK. Currently, Afterpay has the option to purchase ThinkSmart’s remaining stake in the unit. If Afterpay does not complete the purchase, Thinksmart has the right to force a sale in 2024.
Two years after the acquisition, Clearpay finally reached 1 million active shoppers, which made the platform the fastest growing company in the e-commerce industry in Europe. During that time, Clearpay had been a BNPL partner of over 1,000 brands.
Like other BNPLs, Clearpay divides the customer’s bill into four instalments to be paid at their preferred time. The platform offers free interest, although there may be additional charges for late payments.
Note that Afterpay, the parent company, doesn’t disclose unconsolidated financial statements for Clearpay, which means there is no clear data about Clearpay’s financial performance as of writing.
The company also recorded over AU$19.7 billion in transaction volume in the same year. Available in 40 countries, the platform has over 10 million users and 55,000 merchants as of 2021. Reports also say that the company employed around 650 people.
Sources: Afterpay Annual Report, Bloomberg, Cision, Crunchbase, LinkedIn, S&P Global
