THURSDAY PRO // Present in France since June 2021, the Swedish fintech Klarna wants to take advantage of the craze for split payment in order to establish itself with merchants and consumers. Digital spoke with Eric Petitfils, the boss of Klarna France, so that he could enlighten us on this phenomenon.
Forget consumer credit, here is split payment. Increasingly popular, this payment method experienced a spectacular boom during the Covid-19 pandemic. The global split payment market quadrupled between 2018 and 2020 to reach $80 billion, according to Kaleido Intelligence. It could still triple by 2025 to $250 billion. The enthusiasm for BNPL solutions (Buy Now, Pay Later) is also gaining France, where the sector should weigh nearly 25 billion euros by 2025, i.e. a tenth of the world market, while it reached 6 billion euros in 2019, according to figures from the firm Xerfi .
Many start-ups are positioning themselves in this booming market and intend to take advantage of it. This is particularly the case of the Swedish fintech Klarna, a world reference in the field, which landed in France in June 2021. An arrival coinciding with a spectacular financing round of 639 million dollars, which propelled its valuation to $46 billion.
If the Scandinavian company is so well valued, it is because it has been able to capitalize on split payment in order to make it a growth lever for merchants. Klarna has indeed developed a mobile app intended to allow consumers to plan their next purchases. And all the data derived from these can thus serve as a basis for Klarna to help merchants better anticipate consumer buying behavior.
It is with this B2B2C strategy that Klarna popularized the payment smooth (soft), even managing to make it glamorous with prestigious investors such as rappers Snoop Dogg and ASAP Rock. Beyond its approach, which is not limited to split payment, the Swedish fintech benefits from a favorable context. “Consumers are increasingly turning to debit cards and are reluctant to use credit cards because they are heavier products to contract with longer commitments. As a result, they are losing interest in cumbersome solutions and looking for solutions that will meet a need at a given time. We are also witnessing a phenomenon of cash management where it is important to be able to spread out payments”analyzes Eric Petitfils, the boss of Klarna France.
To expand its offer, the company completed several acquisitions last year, such as Inspirock, which seeks to attract travelers, or Stocard, which offers loyalty solutions. “Our vision is to go beyond payment and provide growth drivers for our partners”, assures Eric Petitfils. But while Klarna’s investments are fueling its growth, as evidenced by its gross business volume which climbed 42% in 2021, to $80 billion, they are also weighing on its profitability.
The Swedish fintech has thus announced operating losses of 748 million dollars in 2021, against 150 million in 2020. But this is the price to pay to expand internationally and counter the appetite of the competition. Proof of the euphoria that is gaining the sector, Block (ex-Square) did not hesitate to put 29 billion dollars on the table to seize Afterpay. In France, the start-up Alma is also trying to do well, particularly under the impetus of a fundraising of 115 million euros announced last February, while La Banque Postale has opened a dedicated subsidiary to split payment in March.
Industry momentum attracts regulators’ attention
To date, Klarna claims 1.3 million active users in France and 2,200 partner merchants. Globally, the Scandinavian company claims to reach 147 million buyers and have 400,000 partner merchants. But the growth of Swedish fintech and other industry players is attracting the attention of regulators, who fear BNPL solutions could lead to increased debt, mainly among younger consumers.
For France as for the other countries of the Old Continent, everything should be decided in Brussels within the framework of the revision of the European directive on consumer credit. The French Minister of the Economy, Bruno Le Maire, had also hinted at the end of 2021 that the government would take advantage of the tricolor presidency of the European Union to support a European directive adapted to new uses around consumer credit. “Regulations provide a guarantee of confidence”, believes Eric Petitfils. A more regulated framework will also provide an opportunity to mature the split payment market, which could ultimately accelerate industry consolidation.