Buy-now-pay-later (BNPL) leader Klarna has launched a new price-comparison service putting it on a collision course with Google whilst promising it won’t make shoppers broke.
It also launched a new Comparison Shopping Service (CSS) in 21 markets. A CSS is a website that collects product offers from online retailers and then sends users to the retailers’ websites to make a purchase. Merchants need to work with at least one CSS to begin placing shopping ads.
Google provides a similar service. Klarna though boasts that, unlike Google’s 20% cost per click spend, its new CSS facilitates the publication of product listing ads for a small flat monthly fee.
The companies paying for the service will also be hosted on Klarna’s new price comparison site, meaning they get even more exposure.
The service is available to any merchant that wants to use it to maximise their advertising spend and reach more customers and not just the merchants that have signed up for Klarna’s BNPL services, according to the fintech.
“Concretely, this means that we offer retailers a more effective and cheaper way to increase their customer reach and convert highly relevant traffic from consumers who are searching for products they want to purchase, thereby maximizing merchants’ return on advertising spend,” said David Sandström, chief marketing officer at Klarna.
The news comes just days after Klarna secured a $45.6bn valuation on the back of a $639m SoftBank-led investment round.
The freshly minted quadradecacorn and the rest of the BNPL sector have recently faced a lot of criticism for potentially putting users’ financial wellbeing at risk.
The UK’s Citizens Advice, a network of legal, money and consumer groups, has warned that using BNPL services can be a “slippery slope into debt”.
In the US, 40% of customers who’ve used BNPL services have missed a repayment.
In response to questions about how Klarna will ensure its new services won’t make users financially ruined, a Klarna spokesperson claimed the new services would actually enable customers to save money.
“This service helps merchants reach consumers looking for specific products, and helps consumers find that product at the best price – potentially saving them money,” the spokesperson told Verdict.
“The consumer decides which payment method they want to use at the merchant’s checkout – not on this platform – after they have chosen the product and merchant. The service is open to all merchants, regardless of whether they offer Klarna at the checkout.
“If a consumer selects a product from a merchant that offers Klarna as a payment option, and the consumer decides to use Klarna at the checkout, then we perform a robust eligibility assessment. Unlike a credit card, these checks are performed each and every time a consumer attempts to make a purchase with Klarna to ensure we lend to people who can pay us back. We assess various sources of data, including running a soft credit check.”
The spokesperson added that Klarna only “grant around £90 on average to new customers for their first purchase” and that this amount would only increase once customers have demonstrated their ability to pay back the credit.
“If they fail to do so, they aren’t able to use Klarna again,” the spokesperson said, adding that the BNPL “products never charge interest or fees” and that “our default rates are extremely low – below 1%”, suggesting this means users can “manage their finances sustainably”.
In the UK, the Financial Conduct Authority (FCA) published a review on the BNPL sector in February, pledging it would introduce stricter rules to reel in the industry. Klarna has welcomed the initiative.
GlobalData Thematic Research estimates that the worldwide BNPL sector is expected to be worth $166bn by 2023.