Klarna seeks growth beyond buy now, pay later with IPO

These days, more people are tapping into buy now, pay later plans for everything from clothes to concert tickets.

How it works: In many cases, people take out small loans, which carry no interest and are paid back in increments over brief periods of time.

“I think it makes it better for consumers because it’s an option to where, if something happens, I have an easy access to purchase something,” Randis Dennies, of Memphis, Tennessee, told NBC News.

He said he uses the payment method for groceries, airfare and other purchases. His buy now, pay later company of choice? Klarna.

Founded in Sweden two decades ago, Klarna made its U.S. stock market debut Wednesday with an offering it had delayed earlier this year. After the closing bell Friday, its value stood at around $16 billion. (Rival Affirm has a market capitalization of more than $27 billion; PayPal’s is nearly $64 billion.)

Klarna has more than 26 million users in the United States, and now it wants to be known for more than just buy now, pay later, including through launching a new card and getting involved in mobile phone plans.

“We look at the U.S., we’re like, wow,” CEO Sebastian Siemiatkowski said in an interview for “NBC Nightly News.” “We can offer products that are so much more affordable, so much better, and we can still make money.”

Some of Klarna’s expansion plans, however, have been met with criticism — its partnership with the food delivery service DoorDash, for instance. The news lit up the internet, with social media posts warning people against going into debt for a burrito or a pizza.

Siemiatkowski pushed back on the worries.

“The truth is that Klarna doesn’t only do credit. Twenty percent of our transactions are debit where people pay the full amount,” he said. “So we’re much more like a PayPal wallet.”

Buy now, pay later, for all of its ease and utility in a pinch, has nonetheless triggered warnings from regulators, lawmakers and financial experts.

“It’s convenient for people that don’t have a credit card or don’t want to pay the high interest fees associated with the credit card, but it also leads to a lot of impulse buying and potentially other risks,” said Investopedia Editor-in-Chief Caleb Silver.

A recent survey by LendingTree showed 41% of buy now, pay later customers said they paid late at least once in the past year. That’s up from 34% the year before. If people miss a payment, they may have to pay late fees or be charged interest, depending on their plans.

Klarna said the vast majority of its customers pay on time, despite a recent small uptick in credit losses. But Siemiatkowski, the CEO, also acknowledged that users can get in over their head with short-term loans.

“For sure. And I mean, as any form of credit, they will, right?” he said. “But if I look at the actual outcomes, I know our losses are 20, 30% lower than credit cards. So I know the product is healthier, but it’s still credit.”

Still, buy now, pay later is an option many consumers are glad to have in a period of economic uncertainty defined by high interest rates, stubborn inflation and signs of weakness in the job market.

“As long as they allow me to use Klarna, I will be using Klarna,” Dennies said.