CommBank is making a big play in the buy now, pay later space, investing a total of US$300 million in Swedish Afterpay rival Klarna which officially launched in Australia today.
The bank initially invested US$100 million in Klarna in August 2018, to become its exclusive partner in Australia and New Zealand. Today CommBank announced it is tipping in another US$200 million, at the same valuation as the previous investment, “to increase strategic alignment, bring additional rights, and gain exposure to Klarna’s international growth.”
The US$300 million total investment brings CBA’s shareholding in Klarna Group to 5.5 per cent from its initial 1.8 per cent stake.
CBA and Klarna will jointly fund and have 50:50 ownership rights to Klarna’s Australian and New Zealand business and CommBank also retains a right to partner with Klarna in Indonesia.
Locally the company will be led by Fran Ereira, as General Manager for Australia and New Zealand. Ereira’s resume includes stints at Zip Co and logistics technology provider Temando.
Similar to Afterpay and Zip, Klarna allows customers to buy a product online and pay it off over four equal instalments. The first payment is made when the product ships and then the rest in fortnightly instalments.
The minimum spend is through the service is $35 and the app also allows customers to save their favourite items and set alerts if the price drops.
CBA app users are able to connect their CBA account to a Klarna account, via their banking app. Klarna is also available to non-CBA consumers who can download the Klarna app from the app store.
Users need to be over 18 and once verified and approved, Klarna will determine each customer’s ability to repay at each time of purchase, including by carrying out a credit check.
CBA Chief Executive Officer Matt Comyn said Klarna addresses 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,” 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 for the benefit of CBA customers and many more Australian consumers.”
Founded in 2005, Klarna offers a wide range of products within payments, shopping and personal finances including its buy now, pay later service. Globally more than 85 million consumers use Klarna, and the company partners with over 205,000 merchants in North America, the UK and Europe.
Sebastian Siemiatkowski, CEO of Klarna Group, said: “Australian consumers’ expectations are evolving, they demand seamless, intuitive and transparent online shopping services that better meet their daily needs. Klarna streamlines this experience from browsing to payment at checkout to post-purchase which allows consumers to take control and shop on their terms all from a single app.”