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BNPL Firms Take to Subscriptions to Boost Margins


As buy now, pay later (BNPL) firms look to drive profits beyond the small cut they take of each transaction, Klarna is the latest to turn to a subscription model to generate reliable revenue.

The company announced on Wednesday (Jan. 24) the launch of Klarna Plus, a subscription program charging $7.99 per month, offering waived service fees on the company’s One Time Card, double rewards points and exclusive discounts at select merchants.

“Our research indicates that dedicated Klarna users are looking for an enhanced shopping experience through a subscription model,” David Sandstrom, chief marketing officer at the BNPL company, said in a statement. “Klarna Plus addresses this demand, allowing us to deepen our engagement with 37 million loyal US consumers, while also further diversifying a portfolio of payment and shopping solutions.”

The move comes as BNPL firms look to diversify their revenue streams. Afterpay, for instance, has its invite-only Afterpay Plus Card, charging $5.99 a month and enabling consumers to pay in installments nearly anywhere that accepts Apple Pay, Google Pay or Samsung Pay, with certain exceptions including gambling, adult services and others.

Additionally, in September, reports broke that Affirm was exploring the introduction of a subscription service called Affirm Plus, according to code found in the firm’s iPhone application, with benefits including a 0% annual percentage rate (APR) on installment loans up to $2,500.

“We’re always exploring new ways to bring value to our consumers,” an Affirm spokesperson stated in an email to PYMNTS at the time.

Demand for BNPL options is high. “Tracking the Digital Payments Takeover: What BNPL Needs to Win Wider Adoption,” a PYMNTS Intelligence and AWS collaboration that draws from a census-balanced survey of more than 3,100 U.S. consumers, found 28% of consumers had used deferred payment plans in the previous three months.

Plus, the study found that 8% were moderate users of BNPL, using it several times in that time period, and 2% of consumers are heavy users, using it five times or more.

Yet this demand for BNPL does not necessarily translate to consumers wanting to add another subscription to their monthly bills. PYMNTS Intelligence study “The One-Stop Bill Pay Playbook: Drivers of Consumers’ Bill Payment Priorities,” which drew from a survey of more than 2,100 U.S. consumers, found that when people are unable to pay all their bills, many cut their membership subscriptions. In fact, 50% said they would cancel such subscriptions, while only 19% said they would prioritize paying these bills in full.

Indeed, many consumers are straining under the cost of subscriptions. PYMNTS Intelligence’s “Subscription Commerce Readiness Report: Bridging the Gap Between Subscription Conversion and Retention” revealed that cost is the most common reason people bow out of subscriptions, with 56% of consumers citing it as a reason for canceling a service in the previous year.

As BNPL firms seek to expand their revenue streams, subscription models are emerging as a viable option. Klarna’s launch of Klarna Plus and the exploration of subscription services by Afterpay and Affirm demonstrate the industry’s efforts to diversify and generate reliable revenue. However, consumer concerns about adding more subscriptions to their monthly bills and the cost of these services present challenges that BNPL firms must address to ensure the success of their subscription offerings.