Seeking to increase their exposure to the Buy-Now-Pay-Later (BNPL) trend, Commonwealth Bank (ASX: CBA) has invested a further USD $200 million into European BNPL provider Klarna, bringing their total investment to $300m for a 5.5% stake.

CBA invested US$100m into Klarna Group last year for a 1.8% stake in the company and with this additional $200m investment, CBA will jointly own and fund the Klarna Australia and New Zealand business model, with options for Indonesian partnerships. 

Klarna is one of the largest BNPL providers in the global market with over 85 million clients. Similar to Afterpay (the leading BNPL in Australia, the United States, and New Zealand), Klarna is the leading provider in the UK, and globally overall. Whilst Klarna will be available to all Australian customers, the integrated platform will allow the 5.6 million daily users of CBA’s smartphone app to see their purchases, whilst also getting app notifications from Klarna for wishlist items that have dropped in price or become out of stock.

CBA’s CEO, Matt Comyn, commented on the news “Our partnership with Klarna will further enhance the customer experience in our leading banking app and address the rapidly growing demand among consumers for new payment options. In particular, it allows us to build on our leading technology to deliver the very best payment services for our customers and merchants in Australia, on platforms which are safe, secure, and easy to use.” Klarna’s CEO, Sebastian Siemiatkowski, said on the partnership “We have already developed a strong working relationship with CBA and we look forward to providing even more opportunities together for our customers in the coming months and years.”

CBA’s move into the BNPL sector comes after reports that the number of Australians using a credit card dropped 3% last year.  Whilst it appears that the Klarna model is not entirely ready for its Australian rollout, they are perhaps the most experienced among providers, having commenced operations fourteen years ago. It will be tough competition in the increasingly saturated market, with companies like Afterpay, Zip Pay, Splitit, and Openpay just to name a few, already battling for market share. 

Like its competitors, Klarna allows consumers to split payments into equal periodic installments, with late fees of A$3-7 per missed installment. Unlike others in the sector, they will be conducting credit checks for new users, and actually offering lower prices on purchases conducted via the Klarna app.