The news: Buy now, pay later (BNPL) fintechs Sezzle and Klarna ended 2023 with sales growth and progress toward long-term profitability, according to their most recent financial statements.

Sezzle

• The company’s underlying merchant sales (UMS) shot up 33% year over year (YoY) in Q4 2023, per its earnings presentation—compared with a 19% YoY decline a year ago.
• Annual net income totaled $7.1 million, compared with a $38.1 million loss in 2022.
• Sezzle forecasts that annual net income will total $20.0 million in 2024.

Klarna

• The company’s gross merchandise volume increased 17% YoY in 2023. This is a deceleration from 22% YoY growth last year, per its annual report.
• Total net operating income in 2023 increased 23% YoY to SEK 20.6 billion (about $1.99 billion).

Earnings highlights:

Sezzle’s subscription model has been a success.

• Sezzle launched Sezzle Premium in June 2022 and expanded the program into Sezzle Anywhere in June 2023.
• The two programs totaled 307,000 subscribers at the end of Q4 2023, compared with just 119,000 at the end of 2022.
• The subscription programs are boosting customer engagement: Subscribers made purchases 2.2 times more frequently than non-subscribers.
• And they’re helping Sezzle push further into stores: One-third of Anywhere orders were made in-store. Twenty-two percent of Anywhere purchases were made at discount and specialty stores; 15% were made at grocery stores; and 9% were at restaurants.

Klarna preps for an IPO after releasing its own subscription service.

• Klarna rolled out Klarna Plus to US customers in January as part of its profitability push before going public.
• Its IPO could occur as early as Q3 2024, according to reports from Bloomberg. In addition to a US listing, Klarna is also considering a UK listing.
• The BNPL company is seeking a valuation of around $20 billion, per Bloomberg. This is up considerably from its $6.7 billion valuation in 2022—though nowhere near its record $45.6 billion valuation.

The takeaway: The BNPL industry is leaning into subscription models.

Subscriptions can boost customer engagement, increase sales, and bring in a consistent revenue stream. This is especially important for BNPL fintechs as they search for long-term profitability in a historically low-margin business.

Dig deeper: Check out our BNPL forecast for more information on where we think BNPL growth is headed in the US.

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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