The first buy now, pay later subscription is here

Klarna, the Swedish buy-now-pay-later firm, is launching a monthly subscription aimed at locking in its power users and boosting its IPO prospects, CNBC reports.

The $7.99/month subscription, branded under the creative name “Klarna Plus,” is not able to be paid later but offers benefits like no added service fees when using Klarna’s One Time Card, double rewards points, and access to exclusive discounts with popular brands like Nike, Macy’s, and Instacart. Per CMO David Sandstrom, the offering is a “no brainer” for ~15% of Klarna’s heaviest users.

Why launch it now?... The BNPL provider is nearing an IPO, and Wall Street tends to favor subscription revenue over one-time transactions due to its predictability and compounding effects. The move also comes at a time when BNPL use is skyrocketing.

• BNPL usage hit an all-time high this past holiday season (November-December), rising 14% year-over-year.
• Wells Fargo estimates the five largest BNPL providers originated $46 billion worth of loans last year, up significantly from $2 billion in 2019.

But this level of growth could spell future trouble. BNPL providers often don’t report to credit agencies. So, outside of survey data and what these providers choose to share publicly, not much info exists on the industry. This has created a situation many economists are referring to as “phantom debt,” because no one really knows how pervasive these loans are or how they’re impacting consumers.

🤔 Speaking of consumers… BNPL users tend to be young and well-off – and also more likely to have higher rates of debt and lower credit scores than non-users.