Klarna, buy now pay later & first mover advantage





Loans, that let consumers borrow money at an interest rate and thereby afford very expensive items like cars or homes, have existed for a long time. Buy Now Pay Later (BNPL), however, is a more recent phenomenon with a few key differences — it is meant to incentivize customers to make medium-size purchases like laptops or expensive clothes, are interest-free, and have a shorter time span (~2 months). It’s an “interest-free” loan as long as you pay it back on time.

Klarna, one of the leaders in the Buy Now Pay Later market, had an impressive earnings announcement last week — they got to their first ever month of net profit while growing revenue 17% year-over-year. Their biggest competitors Affirm and Afterpay continue to be unprofitable.

What’s impressive about Klarna is that despite not much product differentiation, they have successfully managed to double down on their first mover advantage and turn that into a profitable growth machine. Looking forward though, the company faces some competition and regulation risks which could change the trajectory of how much market share they end up owning in the long term. In this article, we’ll dive into: