Introduction

Buy Now, Pay Later (BNPL) started as a way to help merchants increase conversions by offering flexible payment options. Klarna was a pioneer in this space, and as someone working in the same industry, I can’t help but admire its success. However, Klarna has evolved beyond its original purpose—shifting from a payment solution to a competitive marketplace. This transformation has significant implications for merchants and payment service providers alike.

Klarna’s Shift: From Payment App to Shopping Platform

BNPL was once about enabling merchants to sell more by removing friction at checkout. Today, Klarna’s app is no longer just a payment tool—it’s a shopping destination. When consumers browse Klarna, they don’t just see their chosen merchant’s products; they see competing offers, sometimes at better prices or with more availability.

The shift is clear: Klarna is no longer just facilitating purchases; it’s influencing where those purchases happen. The customer journey has moved away from merchants’ own websites and into Klarna’s ecosystem, where Klarna—not the merchant—controls the experience.

The Trojan Horse: How Merchants Lost Control

For years, payment service providers have actively promoted Klarna to merchants, positioning it as a tool for customer acquisition and conversion optimization. But the reality is different: merchants are now competing within Klarna’s marketplace, often bidding against each other for visibility.

Klarna’s approach is brilliant: provide merchants with marketing budgets to advertise within its platform, only for those same merchants to find themselves in direct competition. Effectively, they’re paying to “buy back” customers they originally acquired. Klarna has positioned itself as the central player, while merchants are reduced to logistics providers fulfilling orders within Klarna’s ecosystem.

What This Means for Merchants

• Customer Ownership is at Risk: The direct relationship between merchant and customer is weakened as Klarna becomes the primary touchpoint.
• Price Transparency Works Against Merchants: Customers can easily compare and switch to the lowest-priced option within Klarna’s marketplace.
• Marketing Spend is Redirected: Instead of driving traffic to their own websites, merchants are funding Klarna’s marketplace dominance.

The Future of Klarna: Beyond BNPL

Klarna’s trajectory suggests it is no longer competing with other BNPL providers like Affirm—it’s setting its sights on becoming the go-to shopping platform, much like Amazon. This evolution raises critical questions for merchants and payment providers: Should they continue enabling Klarna’s ecosystem, or is it time to rethink BNPL strategies?

Conclusion

Klarna’s transformation from a BNPL service to a full-fledged marketplace is a testament to its innovation. However, for merchants, the trade-off is clear: convenience comes at the cost of customer ownership and direct relationships. The question isn’t whether Klarna will continue evolving—it already has. The real question is: Will merchants recognize the shift and adapt their strategies accordingly?