E-commerce has grown massively in the last several months as the coronavirus pandemic shuttered brick-and-mortar retail and pushed spending online.
Buy now, pay later, too, has seen a boost as more consumers turn to installment payments when they check out online.
Sweden's Klarna, one of the larger buy now, pay later fintechs, has been on a tear. It's raised more than $650 million since the pandemic began, and was last valued at $10.65 billion in September, making it the highest-valued fintech in Europe. In the US, Klarna added 1 million new US customers during the summer.
"For us specifically as a company, this has meant obviously a massive acceleration of the growth of the company and the adoption of both e-commerce and our services," Sebastian Siemiatkowski, co-founder and CEO of Klarna said on Tuesday during Business Insider's Global Trends Festival.
While many consumers limited their discretionary spending in the early stages of the pandemic, Klarna saw consumers use its buy now, pay later options when it came to shopping in categories like fitness, gaming, and home goods.
Beyond offering installment payments, Klarna also has its own app, and in June, launched a loyalty program. More recently, Klarna has inked deals with large retailers like Macy's and Etsy, adding to its existing network of 4,300 US merchants.
Currently, the startup has raised over $2 billion from investors including General Atlantic, Sequoia, and Snoop Dogg.
To stand apart, Klarna is investing in its brand
Buy now, pay later is a crowded space. From fintechs like Affirm and Afterpay to incumbents like PayPal, Klarna isn't the only one banking on consumers' interest in installment payments. To compete, Klarna is trying to build a consumer-facing brand all its own.
"There are a lot of buttons in the checkout. I just want to be the most popular," Siemiatkowski said. "Everything we can come up with that makes consumers want to choose us because they feel we provide more value, let's do it."
And that means investing in its app and features beyond installment payments to create consumer stickiness. Klarna's app currently has more than 12 million monthly active users globally, according to its website.
In the app, users can browse retailers that accept Klarna, make in-store purchases with digitally-issued cards, and track receipts and shipping information.
"There are so many more reasons to use Klarna than just the buy now, pay later offer," Siemiatkowski said. "And that's why we've seen success against people like PayPal, first in the Nordics and in Germany and now in the UK, where we have a higher share of checkout than PayPal on most of our merchants."
A spokesperson for PayPal did not return a request for comment in time for publication.
Klarna wants to help redefine in-store retail
While buy now, pay later players like Klarna have established themselves through e-commerce, they're increasingly looking for ways to bring installment payments in-store, where retail is undergoing a massive transformation.
Even before the coronavirus pandemic, retailers were building omnichannel platforms, connecting online and in-store experiences. Now, brick-and-mortar stores are being designed to provide brand experiences as a way to boost sales online.
And a strong omnichannel strategy can help retailers compete with e-commerce giants like Amazon and Walmart.
"To some degree, the threat from these guys in Seattle to the whole industry, I think, is quite fun," Siemiatkowski said. "It's creating this sense of urgency and a willingness to experiment and be more open."
As it grows, Klarna spends more and more time with its partner retailers on business development, Siemiatkowski said.
"One of the things that's really exciting for us is when we can engage not only as a payments provider, but when we can actually do things together that create value," Siemiatkowski said.