CBA takes on Afterpay and Zip, launching Swedish rival Klarna in Australia

The Commonwealth Bank has taken the fight to buy-now-pay-later (BNPL) fintechs such as Afterpay and Zip, bringing Swedish rival Klarna to Australia.

Klarna Australia launched today and is available through the CBA’s app for online shopping. The BNPL is also available to non-CBA consumers via the Klarna app.

CBA announced last year that it was investing US$100 million (AU$145m) in a joint-venture with Klarna, Europe’s most valuable fintech, with a US$5.5 billion valuation following a US$460 million raise in August last year.

CBA CEO Matt Comyn revealed that the bank has since put another US$200m into the Swedish online payments bank, lifting CBA’s stake in the Klarna Group from its initial 1.8% to to 5.5%. The bank was part of the $460m raise last August. Klarna’s backers include Sequoia, Bestseller Group, Permira, Visa, H&M, Atomico, Blackrock, Snoop Dogg, and CBA. 

CBA and Klarna will jointly fund and have 50:50 ownership rights to Klarna’s Australian and New Zealand business.

CBA boss Matt Comyn and Klarna CEO and co-founder Sebastian Siemiatkowski.

“Our partnership with Klarna will further enhance the customer experience in our leading banking app and address the rapidly growing demand among consumers for new payment options. In particular, it allows us to build on our leading technology to deliver the very best payment services for our customers and merchants in Australia, on platforms which are safe, secure, and easy to use,” Matt Comyn said.

“By partnering with Klarna, we are bringing together our market leading digital technology, merchant relationships and strong customer network with Klarna’s innovative payments technology and integrated shopping experience.”

CBA also retains a right to partner with Klarna in Indonesia.

Klarna has more than 85 million customers buying from 200,000 merchants, having ramped up its US efforts last year.

The business now has offices in Stockholm, London, Manchester, Berlin, Munich, Amsterdam, New York, LA, and Sydney, with 3000 employees, including 1100 software engineers.

It counts rapper Snoop Dogg among its investors and he’s also the face of their US advertising campaign. CEO Sebastian Siemiatkowski, who co-founded the fintech in 2005, is also said to be considering an initial public offering.

Siemiatkowski said: “We have already developed a strong working relationship with CBA and we look forward to providing even more opportunities together for our customers in the coming months and years.”

Around 5.6 million people use the CommBank app every day. The Klarna app has been installed 12 million times globally and has around 8.6 million monthly active app users, with around 1 million transactions processed daily on the platform. The fintech processed US$29 billion in transactions in 2018. It became a fully licensed bank in 2017.

In Australia, customers will be able to buy from all online retailers, with Klarna using a “ghost” credit card to pay the merchant. The business will also run credit checks on customers before providing the BNPL finance. If users are unable to meet Klarna’s 4 payments cycle deadline, the fintech moves the debt to a customer’s credit card or other personal finance product rather than taking it on.

The pending arrival of a new competitor hasn’t dented enthusiasm for existing players.