Klarna is giving the checking account an update and introducing a cashback function: For every purchase made via the Klarna app, customers can now get up to ten percent of the purchase value refunded, depending on the retailer.
Unlike many other loyalty programs, these are not vouchers, but the amount is credited to the Klarna account “like real money” and can be used for payments and to settle outstanding Klarna invoices or transferred to your own bank account.
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At the same time, the fintech is expanding with the free account now called “Klarna Credit”, which has been available in Germany for almost two years. It is now also available in the USA as well as in Austria, Belgium, Finland, France, Italy, Ireland, the Netherlands, Portugal, Spain and the home market of Sweden.
The new services are designed to enable consumers to “earn money while shopping and conveniently manage their money in their Klarna account,” said Sebastian Siemiatkowski, co-founder and CEO of Klarna. Automatic savings plans also allow regular savings in sub-accounts.
Cards, interest, accounts
The new cashback offer is reminiscent of another fintech that has recently been concentrating more and more on classic banking products. The German neobroker Trade Republic launched its so-called “Save Back” function in the spring. This cashback variant also gives money back when you make a purchase with the company’s own Visa card – which can then automatically flow into a share savings plan if the customer wishes.
What the two fintechs also have in common is that they are penetrating the area of traditional banks with their offerings. Trade Republic recently introduced a free checking account. Customers can use it to transfer money in real time, make deposits and withdrawals in the app, and set up direct debits. Both fintechs also advertise attractive daily savings accounts to attract customers: Klarna currently offers 3.58 percent interest on deposits, while Trade Republic offers 3.75 percent.
Klarna as competition for traditional banks
This puts them in competition with traditional banks, which are more cautious when it comes to setting interest rates and sometimes charge high fees for current accounts. At the same time, the top overnight interest rate and the combination of monetary cashback with the account are offers that are not available at many neobanks.
Both fintechs started out very differently. Trade Republic was founded as a mobile trading platform that enables commission-free investing in stocks and ETFs. The fintech now has four million customers in 17 European countries. Since the turn of the year, Trade Republic has also had its own full banking license.
Klarna grew up as a payment service provider primarily with “Buy Now, Pay Later” (BNPL), but has now built up a very broad offering around its shopping platform. In this country, 215,000 people already have a Klarna account.
In the long term, however, the company wants to scale back its revolving credit business, which is often risky for consumers. Klarna has repeatedly come under heavy criticism for its BNPL business because the installment payments have a reputation for enticing careless consumers, especially young people, into taking on debt. The EU has therefore also tightened the rules for BNPL payments.
Klarna is preparing for its IPO
For fintech companies like Klarna and Trade Republic, the new savings and account offers are an important factor in attracting new customers and retaining them in the long term. The fact that the Klarna account is now available in many other European countries and in the USA is also an important step for the Swedish payment provider with regard to its planned IPO.
The fintech company, founded in 2005, was once the most valuable start-up in Europe, but after the interest rate turnaround and the collapse of fintech financing, the valuation fell significantly: from 45.6 to 6.7 billion US dollars. The fintech is currently planning its IPO, although this will probably not take place this year. This year, the focus is therefore primarily on showing that Klarna can be profitable again.
In recent years, expansion into the USA in particular has caused costs, but Klarna’s losses have recently shrunk and efficiency has increased thanks to the use of artificial intelligence (AI). An AI-supported assistant is already taking over the work of 700 full-time human employees. The USA is now Klarna’s most important market and there is also great potential here to win new customers with account and card offers.
What customers need to know
For German users, the expansion will not change anything other than the name of the account, as the checking account has been available here for some time. Klarna also does not need a banking partner for the rollout, as the Swedish fintech is itself a bank. Should Klarna experience problems, customers’ deposits in EU markets would be protected by the Swedish deposit guarantee system up to an amount of 1,050,000 Swedish kronor (around 91,000 euros).
Things are different at Trade Republic: despite having a full banking license, deposits at partner banks Deutsche Bank, JP Morgan and HSBC Continental Europe are still protected. Users can check in the app which bank their money is at. At these banks, too, deposits are protected up to 100,000 euros in the event of a bank bankruptcy.
The cashback function will not be the last innovation to increase customer loyalty at either Trade Republic or Klarna. It is conceivable, for example, that Klarna will also offer traditional loans in the future. However, CEO Siemiatkowski does not want to get into securities trading like Trade Republic does – that would be too different from the current business model.
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(Featured image by Jonas Leupe via Unsplash)
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First published in t3n. An external employee translated and adapted the article from the original. In the event of discrepancies, the original prevails.
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