Walmart has strategically shifted its buy now, pay later (BNPL) services by partnering exclusively with Klarna, replacing Affirm. This move, led by Klarna’s CEO, Sebastian Siemiatkowski, allows millions of Walmart shoppers to benefit from smarter installment loans via Klarna’s OnePay app. Integrated into Walmart’s digital and physical channels, Klarna offers repayment options ranging from three to 36 months.
Despite this, Walmart customers can still access Affirm’s payment options. If Walmart fully transitions to Klarna, Affirm could lose significant revenue, as Walmart purchases accounted for about 5% of Affirm’s gross merchandise volume in the latter half of the previous year.
Industry experts see this partnership as indicative of the maturing BNPL market, spurred by increased competition among providers who enhance sales conversion and average spending through installment plans. Klarna, leveraging AI-powered marketing and competitive conversion rates, attracts a younger demographic aged 18 to 34, positioning itself advantageously in the market compared to Affirm.
Notably, Klarna and Affirm differ in their business models. Klarna’s transactions are mostly interest-free, with third-party underwriting for interest-bearing products, while Affirm relies on interest-bearing products and in-house underwriting, making the latter potentially more sustainable to investors.
Klarna’s shift to longer-term loans, backed by third-party underwriters like Pagaya, may introduce challenges due to recent criticisms of Pagaya’s financial practices. Klarna’s avoidance of consumer fees, in contrast to Affirm’s fee-based revenue, further shapes perceptions of its consumer-friendly approach.
Walmart’s BNPL strategy shift underscores Klarna’s competitive edge, market dynamics, and the broader implications for the fintech landscape. This move reflects Walmart’s alignment with consumer preferences and industry trends, potentially reshaping the US BNPL market.