After the announcement of the Klarna-JP Morgan partnership, Klarna just got a significant pre-IPO bump. Later this year, J.P. Morgan Payments will integrate Klarna as a payment option on its platform, which almost one million users can use. The agreement will introduce Klarna’s payment options, such as interest-free Buy Now, Pay Later (BNPL) and flexible financing alternatives.

Klarna will also become a J.P. Morgan Payments Partner Network with this deal.

Key Takeaways

• This integration of J.P. Morgan Payments with Klarna’s BNPL arm will offer 900,000 users a flexible payment plan, including interest-free options. Adding to its payment choice to J.P. Morgan’s business clients will significantly improve customer satisfaction and sales outcomes.
• With J.P. Morgan Payments Partner Network partnership, Klarna gains a strategic advantage and broader exposure in the financial services market. This partnership can boost Klarna’s credibility and visibility, especially as it approaches a potential initial public offering (IPO).
• The availability of BNPL options has increased conversion rates and average order values for retailers. Merchants using J.P. Morgan’s services can expect enhanced customer purchase experiences by offering more flexible payment terms, leading to higher sales volumes.
• The collaboration between a traditional financial giant and a fintech innovator like Klarna indicates a significant shift towards adopting new financial technologies within mainstream banking. This partnership addresses changing consumer preferences for payment flexibility and sets a precedent for future collaborations in the financial industry, promoting innovation and competitive differentiation.

Klarna-JP Morgan Partnership to Bring BNPL to Business Clients

​In a strategic move, just before the IPO, Klarna, a leading global buy-now-pay-later (BNPL) provider, has partnered with J.P. Morgan Chase & Co. to offer BNPL options to the bank’s business clients. This collaboration aims to integrate Klarna’s flexible payment solutions into J.P. Morgan’s extensive payments infrastructure, providing merchants with innovative financing options to enhance customer experience and drive sales. Almost 900,000 businesses using J.P. Morgan Payments will now have the opportunity to offer Klarna’s financing solutions to their customers.

Buy-now-pay-later (BNPL) services have revolutionized consumer financing by allowing shoppers to split purchases into manageable installments, often interest-free. This model has gained traction globally, appealing to consumers seeking flexibility and merchants aiming to boost conversion rates and average order values. According to a report, retailers offering BNPL options, such as Affirm, have seen conversion rates grow by 20% on average, increasing average order values by 87%.

Established in 2005, Klarna has emerged as a dominant player in the BNPL sector, operating in 26 countries and partnering with over 575,000 merchants. The company’s services process approximately 2.5 million transactions daily, reflecting its widespread adoption and consumer trust. Klarna’s recent financial reports indicate a revenue of about $1.2 billion in the first half of 2024, highlighting its robust growth trajectory. ​

J.P. Morgan Chase, a titan in the banking industry, processes over $2 trillion in payment transactions annually through its payments division. By integrating Klarna’s BNPL solutions, J.P. Morgan aims to enhance its service offerings to business clients, enabling them to provide flexible payment options to their customers. This partnership signifies J.P. Morgan’s commitment to embracing innovative financial technologies to meet evolving consumer demands. ​

For businesses utilizing J.P. Morgan’s payment processing services, the integration of Klarna’s BNPL options presents several advantages:​

• Enhanced Customer Experience: Offering BNPL options can attract a broader customer base, including those who prefer or require flexible payment plans.​
• Increased Sales and Conversion Rates: BNPL services have been associated with higher conversion rates and increased average order values, as customers are more likely to complete purchases when afforded payment flexibility.​
• Immediate Payment to Merchants: Despite customers paying in installments, merchants receive full payment upfront from the BNPL provider, improving cash flow and reducing financial risk.​

Klarna is set to join the J.P. Morgan Payments Partner Network. This collaboration leverages J.P. Morgan Payments’ comprehensive array of payment solutions and third-party affiliations, assisting clients in developing, executing, enhancing, and refining their payment strategies to align with specific business requirements.

David Sykes, Klarna’s Chief Commercial Officer, mentioned that partnering with J.P. Morgan Payments accelerates Klarna’s goal to expand the availability of its payment solutions to a broader array of businesses, propelling its vision to make Klarna’s services ubiquitous for all types of purchases.

Sebastian Siemiatkowski, CEO of Klarna, observed that in recent years, Klarna has evolved into a third-party network akin to American Express and PayPal, emphasizing its natural progression as a bank amidst growing competition in retail banking services.

He also pointed out that Klarna is pursuing an American banking license as part of its US expansion strategy to enhance its control over customer experiences and enrich its service offerings.

Previously, J.P. Morgan’s credit card division had barred using services like Klarna and Affirm to make payments. The bank explained this by noting that it typically does not allow payments for one credit product with another.

In an interview, Max Neukirchen, Co-Head of Global Payments at J.P. Morgan, stated that Klarna is the initial partner. Still, they recognize that clients often seek multiple options and aim to accommodate those needs.

Last month, Klarna also broadened its global partnership with Stripe, the payment platform. This extension enables businesses using Stripe in 25 countries to adopt Klarna’s payment methods quickly.

The BNPL market has rapidly expanded, with numerous providers entering the space. Companies like Affirm, Afterpay, and PayPal have established themselves as significant players, each offering unique features to cater to diverse consumer needs. For instance, Affirm provides short-term and long-term financing options, accommodating various purchase amounts and repayment preferences. ​

On the other hand, Klarna’s anticipated US IPO in 2025 will be a significant development. Following its IPO registration with the US Securities and Exchange Commission in November, the company plans to announce its listing details as early as April 2025. As of now, Klarna has not finalized a listing location within the US.

Additionally, Klarna has been focusing on cost reduction and downsizing its balance sheet in preparation for the IPO. The company believes that leveraging artificial intelligence (AI) will enable it to reduce its workforce by nearly half. Klarna is also actively managing its assets, having recently divested most of its UK loan portfolio to the US hedge fund Elliott to liberate capital for further lending expansion.

About J.P. Morgan

J.P. Morgan Chase & Co. is a global financial services company with operations across consumer banking, commercial and investment banking, and asset management. Through branches, ATMs, and digital platforms, it provides deposit accounts, investment and lending products, mortgages, credit cards, auto loans, and payment services to individuals and small businesses. The company also offers investment banking services such as corporate advisory, capital-raising, loan syndication, risk management, and securities services, including custody and trading.

In addition to serving individuals and businesses, J.P. Morgan supports small and mid-sized companies, local governments, nonprofits, and commercial real estate clients with lending, payments, and asset management. It provides institutional and retail investors with multi-asset investment management, retirement services, and estate planning. Founded in 1799, J.P. Morgan Chase is headquartered in New York City.

About Klarna

Founded 2005 in Stockholm, Sweden, Klarna was created by Niklas Adalberth, Sebastian Siemiatkowski, and Victor Jacobsson. What started as a small startup quickly expanded into a global fintech leader. The company initially gained traction by offering a secure payment solution that let customers receive products before making a payment, reducing risk for retailers and building consumer trust. This model fueled Klarna’s growth across Europe and into the US by 2015.

By 2025, Klarna will operate in over 45 countries, serving over 150 million users. It provides various payment options, including direct payments, pay-after-delivery, and installment plans, alongside a shopping app and merchant services for over 500,000 partners. While its valuation has declined since its 2021 peak, Klarna remains a major player in fintech, particularly among younger consumers. The company faces regulatory challenges and competition but focuses on innovation, including AI-driven personalization and sustainability initiatives.

Conclusion

The partnership between J.P. Morgan and Klarna integrates traditional banking with fintech innovation, providing nearly one million businesses access to Klarna’s BNPL services through J.P. Morgan Payments. This enhances customer experiences and sales by meeting the growing demand for alternative payment options.

As Klarna approaches its anticipated U.S. IPO, this strategic partnership enhances its market position and credibility. J.P. Morgan’s adoption of BNPL services reflects a shift in banking toward flexible financing options. The success of this integration could set a precedent for future collaborations between banks and fintech firms.