Some years ago, July 2015 to be exact, I interviewed Niklas Adalberth, co-founder of Klarna. Niklas left the company shortly after but is still invested and, interestingly, is investing in other unicorns like Mollie. Not bad for a guy who was flipping burgers for a living in his 20s (he’s now 39). I quote from that six-year-old interview:
We also had one other big benefit, and that was that we had no previous banking or payment expertise. My expertise or experience came from flipping burgers at Burger King. That's all the knowledge I had when we started this business. This was a good thing because it made us rethink everything.
To be honest, I think Klarna are the trailblazer for the BNPL (Buy Now, Pay Later) movement, just as Zopa were the trailblazer for P2P lending. Maybe that’s why Klarna are now Europe’s second biggest FinTech unicorn with a latest valuation of $46 billion.
What’s interesting is that everyone now seems to be getting in on the BNPL trend today. Square acquired Afterpay and Amazon just did a deal with Affirm. If you’re not aware of these deals, they’re pretty important.
Payments company Square has reached a deal to acquire Australian “buy now, pay later” provider Afterpay in a $29bn all-stock transaction that would be the largest takeover in Australian history. Square, whose chief executive Jack Dorsey is also Twitter’s CEO, is offering Afterpay shareholders 0.375 shares of Square stock for every share they own — a 30 per cent premium based on the most recent closing prices for both companies … “Square and Afterpay have a shared purpose,” said Dorsey. “We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles.”
Nicely, as some of you may have missed it, Square posted their investors presentation for buying Afterpay online. I liked slide 12 which explained their shared vision and culture:
Then there’s Affirm:
Amazon is diving into the buy now, pay later space. The e-commerce giant is teaming up with Affirm for its first partnership with an installment payment player on the popular e-commerce site. Affirm’s buy now, pay later checkout option will be available to certain Amazon customers in the U.S. starting Friday Sep. 3 with a broader rollout in the coming months, the companies said in a statement. The partnership will let Amazon customers split purchases of $50 or more into smaller, monthly installments. Affirm’s stock spiked as much as 48% after-hours Friday Aug. 27 on the news, adding more than $8 billion to its market capitalization, later settling up around 33%. Amazon shares were unchanged.
Interestingly, via LinkedIn, I stumbled across Aakash Gupta, Group Product Manager, who has just written a glowing report about PayPal:
In studying the history of PayPal, we have encountered nearly the entire core toolkit of product growth professionals: solving user needs, building two-sided network effects, unlocking social, referrals, putting the user first, and new growth products. We have now gotten to tactically feel these strategies applied at a real company. Importantly, we have also gotten to learn when to apply this toolkit: after PMF (Product-Market Fit). We have also learned how vital it is to continue to iterate on each lever.
Aakash’s analysis of PayPal is an interesting piece and recommended reading. All in all, I find it interesting to write about Klarna, Square, Affirm, Afterpay and more, without a single mention of a bank or traditional payments provider. The world sure is changing.
Oh and talking of banks and traditional payments providers, they decry BNPL as a market that’s bad for consumers or, rather, the media does. Really? It’s just a credit card without the plastic, isn’t it?
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...