Walmart partners with Klarna to revolutionize ‘buy now, pay later’

Walmart recently made waves in the financial technology world by announcing a new partnership with Klarna, making them the exclusive provider of buy now, pay later (BNPL) services for the retail giant. This move effectively replaced their previous partner, Affirm, in what is considered one of the most coveted partnerships in the industry.

Sebastian Siemiatkowski, CEO of Klarna, expressed excitement over the collaboration with Walmart, emphasizing that this development will allow millions of Walmart customers to shop smarter using Klarna’s OnePay installment loans. OnePay, the finance app and digital wallet provider backed by Walmart, is overseeing the integration of Klarna’s services across all of Walmart’s digital and physical platforms, offering customers flexible repayment terms ranging from three to 36 months.

Despite Klarna’s announcement of being the exclusive BNPL provider for Walmart, it may not be the end of the road for other options. According to an SEC filing, Walmart customers can still utilize Affirm’s payment options, showing that the competition for Walmart’s business is not entirely settled. However, if Walmart does decide to sever ties with Affirm, the company stands to lose a significant portion of revenue, as indicated by the SEC filing, which revealed that Affirm’s purchases through Walmart contributed about 5% of its gross merchandising volume in the latter half of 2024.

While the reasons behind Walmart’s decision to switch to Klarna remain speculative, industry experts suggest various factors could have influenced this move. Christopher J. Uriarte, a payments expert, highlighted that as the BNPL industry matures, retailers are re-evaluating their strategies to optimize conversion rates and increase average spending. Klarna’s focus on innovative AI-powered marketing services and competitive conversion rates may have set them apart from competitors.

Michael Gunther, VP and head of insights at Consumer Edge, pointed out the demographic preferences of each BNPL service’s customer base, with Klarna skewing younger compared to Affirm. This demographic alignment might have played a role in Walmart’s decision-making process. Gunther also suggested that Walmart might be following Klarna’s success, as they have surpassed Affirm in market share to become the largest player in the US BNPL space.

Diving deeper into the competitive landscape, it is evident that Klarna and Affirm have differing business models. Klarna’s network primarily consists of interest-free transactions, with interest-bearing products underwritten by third parties. In contrast, Affirm relies on interest-bearing transactions, with all underwriting conducted in-house. Investors may see the interest-bearing model as more sustainable and poised for growth.

Additionally, Klarna has committed to charging no fees, distinguishing itself from Affirm, which generates a significant portion of revenue from consumer-paid fees. Analysts note that Klarna’s consumer-friendly approach appeals to a broader audience, emphasizing transparency and value for customers.

With the shift towards Klarna as Walmart’s exclusive BNPL provider, the industry continues to witness rapid evolution and fierce competition among service providers vying for lucrative partnerships with major retailers. As consumer preferences and market dynamics evolve, companies like Klarna and Affirm are constantly adapting their strategies to stay competitive in the rapidly expanding BNPL space.