There's another service that lets you buy products and pay for them later. Klarna launched on Thursday in Australia in partnership with the Commonwealth Bank – and it's not shy in telling retailers why they should adopt it rather than Afterpay.
Klarna is a Swedish payments app that counts the Commonwealth Bank as a significant investor – as the Sydney Morning Herald notes it's also got Snoop Dogg on board as an investor. You can make your own jokes about "high" interest rates now.
According to Klarna, its iOS and Android app has racked up more than 12 million downloads to date. The app allows consumers to use its services with any online retailer. It does so via adding merchants to the Klarna app and then creating a one-time "ghost" VISA card that actually handles the transaction. You'd be fairly hard pressed to find a reliable online merchant that rejected a VISA payment, which is how it can manage compatibility across most online storefronts. Klarna's position is that it offers a complete shopping solution, rather than being simply a fintech provider offering buy now, pay later services.
At launch, a Klarna spokesperson confirmed it isn't charging interest rates or late fees, although it's not entirely clear how long that grace period will last.
There's a particular focus on CBA customers, which makes sense given the bank's 5.5% shareholding in Klarna, with direct Klarna access from within the existing CBA app.
Of course, all that relies on vendors accepting Klarna's market proposition, and that could be tricky in the local market where services like Afterpay already have a significant mindshare. According to Klarna's chief executive officer Sebastian Siemiatkowski, however, Afterpay is charging too much to merchants for its services.
The Sydney Morning Herald quotes Siemiatkowski as stating the 5% rate that Afterpay takes from merchants is too high.
"We don’t think that is a long term sustainable level, we think they [Afterpay] will drop to the same levels we operate at."
You might not think that merchant rates are anything you need to fuss about, but it's worth bearing in mind that those broad costs are often factored into the final cost that consumers pay, so something of a price war on merchant rates could actually be good for you if you're a fan of the many buy now, pay later systems now available to consumers.
While it's early days for Klarna in Australia, globally it dwarfs Afterpay in user numbers; the Herald reports Afterpay as having 6.6 million active customers, while Klarna claims more than 85 million.