Klarna, nearing IPO, wins fintech partnership from Affirm

Swedish fintech firm Klarna will be the exclusive provider of buy now, pay later loans for Walmart, taking a coveted partnership away from rival Affirm, has learned.

Klarna, which just disclosed its intention to go public in the U.S., will provide loans to Walmart customers in stores and online through the retailer’s majority-owned fintech startup OnePay, according to people with knowledge of the situation who declined to be identified speaking about the partnership.

OnePay, which updated its brand name from One this month, will handle the user experience via its app, while Klarna will make underwriting decisions for loans ranging from 3 months to 36 months in length, and with annual interest rates from 10% to 36%, said the people.

The new product will be launched in the coming weeks and will be scaled to all Walmart channels by the holiday season, likely leaving it the retailer’s only buy now, pay later option by yearend.

The move heightens the rivalry between Affirm and Klarna, two of the world’s biggest BNPL players, just as Klarna is set to go public. Although both companies claim to offer a better alternative for borrowers than credit cards, Affirm is more U.S.-centric and has been public since 2021, while Klarna’s network is more global.

The deal comes at an opportune time for Klarna as it readies one of the year’s most highly-anticipated IPOs. After a dearth of big tech listings in the U.S. since 2021, the Klarna IPO will be a key test for the industry. It’s private market valuation has been a rollercoaster: It soared to $46 billion in 2021, then crashed by 85% the next year amid the broader decline of high-flying fintech firms.

CEO Sebastian Siemiatkowski has worked to improve Klarna’s prospects, including touting its use of generative AI to slash expenses and headcount. The company returned to profitability in 2023, and its valuation is now roughly $15 billion, according to analysts, nearly matching the public market value of Affirm.

For Affirm, the move is likely to be seen as a blow at a time when tech stocks are particularly vulnerable. Run by CEO Max Levchin, a PayPal co-founder, the company’s stock has surged and fallen since its 2021 IPO. The lender’s shares have dipped 18% this year.

Affirm executives frequently mention their partnerships with big merchants as a key driver of purchase volumes and customer acquisition. In November, Affirm chief revenue officer Wayne Pommen referred to Walmart and other tie-ups including those with Amazon, Shopify and Target as its “crown jewel partnerships.”

An Affirm spokesman declined to comment.

The deal is no less consequential to Walmart’s OnePay, which has surged to a $2.5 billion pre-money valuation just two years after rolling out a suite of products to its customers.

The startup now has more than 3 million active customers and is generating revenue at an annual run rate of more than $200 million.

As part of its push to penetrate areas adjacent to its core business, Walmart executives have touted OnePay’s potential to become a one-stop shop for Americans underserved by traditional banks.

Walmart is the world’s largest retailer and says it has 255 million weekly customers, giving the startup — which is a separate company backed by Walmart and Ribbit Capital — a key advantage in acquiring new customers.

Last year, the Walmart-backed fintech began offering BNPL loans in the aisles and on checkout pages of Walmart, reported at the time. That led to speculation that it would ultimately displace Affirm, which had been the exclusive provider for BNPL loans for Walmart since 2019.

OnePay’s move to partner with Klarna rather than going it alone shows the company saw an advantage in going with a seasoned, at-scale provider versus using its own solution.

OnePay’s push into consumer lending is expected to accelerate its conversion of Walmart customers into fintech app users. Cash-strapped consumers are increasingly relying on loans to meet their needs, and the installment loan is seen as a wedge to also offer users the banking, savings and payments features that OnePay has already built.

Americans held a record $1.21 trillion in credit card debt in the fourth quarter of last year, about $441 billion higher than balances in 2021, according to Federal Reserve Bank of New York data.

Next up is likely a OnePay-branded credit card offered with the help of a new banking partner after Walmart successfully exited its partnership with Capital One.

“We’re looking forward to going down this new path where not only can they provide installment credit … but also revolving credit,” Walmart CFO John David Rainey told investors in June.

— ‘s MacKenzie Sigalos and Melissa Repko contributed to this report.