Klarna has grown in Canada, amassing 640,000 active users roughly 18 months after it first expanded into Canada.
According to Fintech Global, Klarna has processed more than 2 million orders and launched strategic retail partnerships with Airbnb and SSENSE, further solidifying its position within the Canadian market.
“On its path towards profitability, Klarna has been focused heavily in the U.S. market but its work in Canada is paying off,” said Ben Danner, Senior Analyst for Credit and Commercial at Javelin Strategy & Research. “Clearly, Canadians are seeing the value in using BNPL.”
This indicates a tremendous shift where consumers are distancing themselves from traditional, high cost and interest-bearing credit models and instead engaging with alternative and more flexible payment options. Instead of paying large sums upfront or using credit cards, consumers are preferring to split their payments into installments.
Like Klarna, BNPL Market is Booming
Buy now, pay later (BNPL) services are gaining popularity worldwide and there are no signs of slowing down. According to a Research and Markets report, global BNPL payments are expected to increase by 21.7% on a yearly basis, reaching nearly $528 million by 2023. This has been largely driven by e-commerce penetration.
BNPL first began picking up steam during the COVID-19 pandemic when millions of customers worldwide were forced to shop online, many for the first time. Both transaction value and volume soared for BNPL providers.
The Challenges of BNPL
One of the greatest challenges facing the BNPL market is its potential to create debt among consumers. Consumers can easily accumulate multiple micro-loans via different providers. If any of these loans have a missed payment, this can negatively impact the consumer’s credit score. A missed payment can result in a hard credit check, which can further impact a customer’s credit score.
Separate data from Bankrate found that more than 50% of BNPL users have reported falling behind on their payments. Regulations in the UK have been put in place to educate consumers on how to use BNPL services responsibly. It remains to be seen if the U.S. will follow suit.