The news: Klarna rolled out a subscription service called Klarna Plus to US customers, per a press release.

• The subscription has a monthly fee of $7.99 and offers customers waived service fees on its buy now, pay later (BNPL) product.
• It also doubles the points users get with Klarna’s rewards program, offering 2 points for every $1 spent.
• And it includes exclusive deals such as discounts at retailers like Nike and Instacart, which will total about $30 in savings per month, according to Klarna.

Why this matters: This launch helps Klarna stay competitive as other BNPL providers are exploring similar subscription services.

• In June, Sezzle launched Sezzle Pay Anywhere, a subscription service aimed at financially underrepresented customers.
• Reports swirled in September that Affirm is readying to launch its own service called Affirm Plus.

The bigger picture: Klarna is preparing for an IPO in the US.

• The BNPL fintech has been on a profitability push ahead of a potential IPO. And it’s working: Globally, Klarna achieved its first quarterly profit since 2019 in Q3 2023, bringing in SEK 130 million ($11.89 million). It also posted a fourth consecutive quarter of gross profit in the US in Q3.
• While the IPO has been suspected for a while, “it’s very likely that this is going to happen quite soon,” Klarna CEO Sebastian Siemiatkowski said in an interview with Bloomberg earlier this week.
• Klarna could be valued at more than $15 billion, Sky News reported in November.

Klarna Plus can help the company maintain strong growth as it goes public. It will bring in a new and consistent revenue stream for Klarna, bolstering its financial health.

The takeaway: The subscription service model is growing throughout the payments industry.

• In addition to coming to BNPL platforms, the subscription trend has extended into the credit card space. TD Bank last year launched TD Clear (a subscription-based credit card that doesn’t charge interest), and startup Neu rolled out the Neu Card (a subscription-based student card) in October, for example.
• The subscription service model provides a clear value proposition and payment transparency. Consumers choose to pay an agreed-upon monthly amount for the value the services represent and know what they will pay over its duration.

And they’ve proved popular: 83% of consumers subscribe to video-on-demand services alone, per July 2023 data from Leichtman Research Group.

This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a three-times-weekly recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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