Online payment processing platform Stripe has partnered with Buy Now Pay Later (BNPL) financial platform Klarna in a move that will boost revenues and increase customer conversions among Stripe business partners.
In research conducted by Klarna, the company claimed that its platform helps partners generate a 30% average increase in checkout conversion rate, along with a 41% increase in average order value. Such potential increases to Stripe’s revenue could particularly help aid its valuation ahead of its long-awaited IPO or direct listing in early 2022.
Stripe IPO or direct listing expected in early 2022
The company’s valuation could now surpass over $100bn after news of the partnership. In the latest round of funding in March 2021 which amounted to $600m, the company’s pre-money valuation was $94.4bn. It has so far raised over $2.2bn in funding since its inception in 2010. Fuelled by growth from online payments after the Covid-19 pandemic, now is the perfect time for the company to go public.
Whether the company decides to directly list due to the size of its valuation or launch an IPO, the company is bound to raise significant capital with an already strong portfolio of investments and acquisitions.
Debt-laden British public spend billions on BNPL credit services
Businesses that use the Stripe platform for its financial processing technology include the likes of Deliveroo, Booking.com, MADE, and Monzo. This move will allow customers shopping on the relevant platforms to select Klarna’s convenient and sometimes controversial BNPL option at the checkout in order to pay for their products.
Controversies have sparked from the BNPL platforms like Klarna after a recent report showed that British shoppers had amounted GBP4bn ($5.1bn) in outstanding debt using the method to pay for products during the Covid-19 pandemic. Financial reporting site Credit Karma claimed that 7.7 million Brits paid an average of GBP538 ($690) in BNPL purchases.
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Critics of the service argue that BNPL platforms encourage vulnerable people to take out credit for money they don’t have.
Regulation of industry could be on the horizon
Earlier this month, the British government indicated that it would be keeping an eye on the industry and that regulations to the BNPL platforms were on the way. Easy-to-acquire forms of credit have been controversial in the UK with the likes of high interest rate pay-day loan company Wonga, which in early 2021 in the House of Commons, Klarna was likened to.
Wonga went bankrupt in 2018 after 200,000 of its customers owed over £400m and a had extraordinarily large amounts of compensation claims following claims of bad practice.