Klarna CEO Sebastian Siemiatkowski said the increased competition in the buy now, pay later (BNPL) sector has retailers pushing for lower fees, Bloomberg reported Tuesday (Jan. 25).
“I wish I could convince them to pay 6%, but it was a long time ago that I heard any deal quoted at those levels,” Klarna Siemiatkowski said, per the report. “The price has dropped due to competition.”
The number of people who have tried at least one BNPL service has climbed 300% annually since 2018, according to the report. BNPL firms typically charge between 3% and 6% of purchase prices when consumers pick the flexible payment option.
The practice is the subject of a Consumer Financial Protection Bureau (CFPB) investigation, as the agency said in a press release last month that Klarna and its BNPL rivals must submit information about industry practices and risks.
“As competitive forces pressure the merchant discount, lenders will need to find other sources of revenue to maintain growth and profitability,” the release stated. “The bureau would like to better understand practices around data collection, behavioral targeting, data monetization and the risks they may create for consumers.”
Klarna is ready for the CFPB’s review, Siemiatkowski told Bloomberg, noting the company already cooperates with regulators in countries where it works.
“I would, at this point in time, call it more of an inquiry than an investigation,” he said, per the report. “With that said, I think it’s healthy. There may be aspects of products where regulation should be improved.”
The BNPL industry could continue to be reshaped through partnerships and acquisitions this year. Zip is eyeing BNPL platform Sezzle in the latest potential transformation of the sector.
Last year, Square struck a deal to acquire Afterpay for about $28 billion, Affirm bought Paybright in a separate deal, and Stripe bought Paystack, among other transactions in the space that’s attracting high levels of attention.