The news: Klarna debuted a two-tiered membership program, per a press release. 

The program will roll out in the US in the following weeks.

What the program includes:

• Premium tier. For €17.99/mo, members get 0.5% cash back purchases paid from their Klarna balance. Cardholders can also subscribe to publications like BILD, ClassPass, Condé Nast , The New York Times, The Times, and WELT. Global travel insurance is also included.
• Max tier. For €44.99/mo, members receive 1% cash back on transactions. Max members get even more subscription options, including Audiobooks.com. Travel benefits include unlimited airport lounge access through LoungeKey Pass, which services over 1,400 lounge locations.

Enrollees can redeem their cash back at travel providers like Air France–KLM, British Airways, United Airlines, and Turkish Airlines and hotel groups like Accor, IHG Hotels & Resorts, Radisson, Global Hotel Alliance, and Wyndham.

Will it work?: Buy now, pay later (BNPL) platforms have long tried to compete with credit card companies’ deep bench of travel and cash-back rewards. But with thinner margins, closing that gap has proven challenging. 

Funding rewards with subscriptions could help, but Klarna will have to justify the cost. €44.99/mo cracks over €500 annually, making Klarna’s top tier within spitting distance of Citi’s Strata Elite card, which boasts far more competitive rewards. Klarna’s 1x points for all purchases is paltry in comparison.   

One saving grace for Klarna: Its BNPL-enabled card is taking off in North America—the Klarna Card topped 1 million sign ups within the first 11 weeks of its debut. Customers who use Klarna’s card frequently may be able to justify the cost if they believe the ease and frequency of shopping with BNPL in-store and online warrants the investment. 

What BNPL firms can do next: Klarna’s second stab at a rewards membership program may prove more fruitful. This places the onus on competitors like Affirm, Sezzle, Cash App Afterpay, and PayPal to respond in kind. 

Offering better rewards is one way to stand out: PayPal’s Pay Later offered an untouchable 5% back during a holiday promotional period. While platforms could mimic Klarna’s membership program, BNPL providers could also expand promotional 0% interest windows, like Affirm’s latest offer, to sway young consumers who view installment loans as safer than revolving credit. 

Rather than ask consumers to overextend themselves by paying fees they likely already can’t afford, making installment plans as painless as possible can drive loyalty and volume.