How the CBA/Klarna tie-up will differentiate from Afterpay

  • By Christine St Anne

Any buy-now-pay-later service can provide payment installments, it's what you offer beyond that, is what will make the difference, according to Klarna founder and CEO Sebastian Siemiatkowski.  

On Thursday, the Commonwealth Bank and Klarna officially launched their tie-up, which was announced at CBA’s results back in August 2019

After an initial investment of US$100 million, CBA has invested a further US$200 million in Klarna at the same valuation. 

The US$300 million total investment brings CBA’s shareholding in Klarna Group to 5.5 per cent from its initial 1.8 per cent stake.

CBA and Klarna will jointly fund and have 50:50 ownership rights to Klarna’s Australian and New Zealand business. CBA also retains a right to partner with Klarna in Indonesia.

Under the joint venture, CBA app users will be able to easily connect their bank’s account to a Klarna account. This will allow them to shop at any online store. The business is currently eyeing in-store purchases. 

Purchased items will show up in the CommBank app and customers will also be able to take advantage of price drop and out of stock notifications directly from Klarna. 

Klarna will also be available to non-CBA consumers.

Speaking to AB+F at a media lunch, Siemiatkowski (pictured right), acknowledged that Afterpay was a big player in the Australian market but added that Klarna offers a shopping experience that goes beyond the ability for consumers to pay in installments. 

According to RFi Group research, Afterpay has set the standard for BNPL experiences, with consumers still talking about their experiences with Afterpay even if they had used other services. 

The RFi Group research also found that the ability to pay for a product in instalments is a key driver of BNPL use. 

According to, however, Siemiatkowski, it is the whole shopping experience. 

“The ability to pay in installments is a nice feature but it is just one feature,” he said. 

“There is so many other things that as a payments company we can do for the customers.

We were able to sit down with Matt and actually hear him speak about every aspect of the app and how it works and how they built their bank app. I don't meet many bank CEOs where I can have that kind of conversation

“We are trying to continuously innovate and think about all the different use cases, or the different friction points that people have when shopping online, and how we can help to solve them. 

“That's how we think about differentiation.” 

The Klarna app will allow consumers to make purchases at any online retailer with no interest or fees if they pay on time. Consumers can make purchases from multiple merchants in one app.  

They will also have the ability to browse top brands, create universal and curated wish lists, receive price drop notifications, and have access to shopping inspiration, exclusive deals and discounts from local Australian retailers, all from their smartphone.

Klarna provides a ‘ghost card’ - a single-use, prepaid virtual card. All purchases and payments can be managed directly in the app, giving consumers flexibility and control over their spending. 

When creating a Ghost card in the app, users will be able to enter the dollar amount they plan to spend.  

Once ready for checkout, the single-use card details are added in to complete the purchase. 

Siemiatkowski added that Klarna’s commitment to the shopping experience was akin to Apple’s passion to the smartphone. 

“When you asked the question, why was the iPhone better than other smartphones, bobody could really give an answer but it was really the passion. Steve Jobs and his team were crafting an amazing product that every small part of it was different. 

For us it is very natural to work in a regulated environment

“It felt easier to use, it was faster, it had a different interface and that’s how passionate we are about our product.” 

The tie-up with CBA will also give Klarna access to the banks’ extensive merchant relationships. To date, the company partners with over 205,000 merchants in North America, the UK and Europe

Siemiatkowski said that Klarna had met with “a lot of banks” but CBA was the right fit for its business. 

“I myself am sceptical about big companies announcing partnerships. This time we actually found another bank that was just as passionate about the customer experience. And that is rare because we meet a lot of banks. 

“We were able to sit down with Matt [CBA CEO Matt Comyn] and actually hear him speak about every aspect of the app and how it works and how they built their bank app. I don't meet many bank CEOs where I can have that kind of conversation.”  

Klarna will also be conducting credit checks.  Users will need to be over 18 and once verified and approved, Klarna will determine each customer's ability to repay at each time of purchase, including by carrying out a credit check. 

Siemiatkowski also acknowledged that Australia is facing increased regulatory scrutiny on its BNPL sector but said the business was well positioned to still grow in a regulated market. 

“We are a bank, so we are regulated in Europe. 

“For us it is very natural to work in a regulated environment. Regulation is needed but as a business we also have to set our own standards in doing what is right for the customer. We have been able to set high standards for our customers. For example, we are the only in this space doing a credit check on very customer.” 

Today more than 85 million consumers use Klarna. Last year the business processed $51 billion in global transactions.