Stripe, a U.S. mobile payment technology company, and Klarna, a Swedish online payments company, have announced a partnership between the world’s two largest private Internet financial services companies by market capitalization, according to media reports.
Stripe announced Tuesday that it has entered into a strategic partnership with Klarna to offer its merchants a Klarna installment payment service.
Stripe’s main business is not consumer-facing, but helping businesses make payments online or offline.
Stripe is a fintech payments company with a core business in online payment clearing. Stripe bundles complex payment methods into a single block that makes it easy for websites and apps to support a variety of payment methods: credit cards, debit accounts, Apple Pay, and Alipay. Stripe charges a fee for each transaction. Simply put, Stripe is like a virtual POS machine on line.
Stripe said that by working with Klarna, Stripe’s existing merchant customers will be able to offer Klarna as an online payment option in the future.
Sweden’s Klarna also works with merchants to integrate their own payment buttons. By aligning with Stripe, the company will gain access to a wider customer base of merchants for its services.
In addition to consolidating their businesses globally, Stripe and Klarna announced on Tuesday that they are deepening their cooperation in North America. Stripe now accounts for 90 percent of Klarna’s payment order processing in the U.S. and Canada, according to the announcement.
In a recent fundraising deal, Stripe Capital was valued at $95 billion, making it the most valuable private internet finance startup in the world, according to CB Insights. By comparison, Klarna has the second largest market capitalization of its kind at $46 billion. The two companies, both private unicorns worth more than $1 billion, are expected to go public soon.
Stripe’s partnership with Klarna is essentially a sign that the payments giant doesn’t want to miss out on the installment market.
As U.S. payment competitors like Square and PayPal aggressively expand into installment payments, Stripe is reluctant to sit on the sidelines.
Klarna was reportedly born in 2005. The installment payment service for consumers met market demand and its business grew rapidly, making it one of the strongest brands in the internet finance industry in Europe.
Stripe also said Tuesday that merchant customers saw an average 27 percent increase in revenue and a 41 percent increase in funds per transaction order after offering Klarna’s installment option.
The installment service has its critics, however.
Critics argue that installment payments allow consumers, especially young people, to shop without thinking about whether they can afford them.
In the UK, government agencies have developed plans to regulate the hire-purchase industry to avoid harm to consumers.