Apple Pay’s Klarna Partnership: A Game-Changer for Retailers, or a Slippery Slope for Shoppers? Daily Dose of Digital - 01/11/24
James Gray
Head of Digital & Creative | Cox Automotive | 20+ Yrs as an Innovative Digital, Marketing & Tech Professional
We've all been there (in fact, I did it earlier today)... whacking a slightly unnecessary purchase on Klarna, kicking that can down the road for actually paying for that new hoody! This is what's known as BNPL - Buy Now, Pay Later and there's been some interesting developments with how this integrates with people's increasingly scaling digital wallets.
As digital payment technology continues to evolve, Apple Pay's recent integration with Klarna's Buy Now, Pay Later (BNPL) service marks a significant moment for both consumers and merchants. This move is set to simplify the checkout process by embedding a flexible payment option within Apple Pay, expanding choices at both eCommerce and physical bricks-and-mortar retailers (whether they've offered Klarna previously or not).
Yet, while this development offers potential gains for businesses and ease of access for consumers, in my opinion, it does also raise questions about the accessibility of debt and the financial risks associated with BNPL services.
Why Klarna’s Integration with Apple Pay Matters for Retailers & Shoppers
This partnership reflects the latest shift in consumer payment preferences, as shoppers increasingly opt for seamless, flexible payment solutions. Klarna, known for its diverse payment plans that allow customers to defer or split payments over time, now becomes a feature within Apple Pay’s ecosystem—available online, in-app, and potentially in-store at select retailers.
For eCommerce and physical retail merchants, this offers a win-win: Klarna’s BNPL option embedded in Apple Pay may reduce cart abandonment and drive higher conversions. Shoppers who may not have the cash upfront are now more likely to complete their purchases, particularly on higher-ticket items, thanks to the availability of an instalment plan.
The frictionless experience of Apple Pay, which already simplifies payments by enabling one-tap checkouts, becomes even more attractive with Klarna’s flexibility. Data suggests that the ease of access to BNPL options within a trusted platform like Apple Pay will likely accelerate adoption, putting more BNPL transactions within reach of a wider audience and in new environments.
The appeal for businesses is evident: Klarna’s BNPL model has proven to increase average order values and conversion rates significantly, which could be highly lucrative for retailers.
The Risks of Convenient Spending: Is the BNPL Model Too Accessible?
The appeal of Klarna’s BNPL offerings is clear, but this accessibility also raises concerns about financial health. Embedded within Apple Pay, BNPL options may create a situation where consumers feel even less connected to their spending—a trend that echoes the evolution of contactless and mobile payments. The “tap-and-go” model has been linked to higher spending, as consumers are less likely to notice how much they are spending compared to traditional payment methods.
Experts in personal finance have voiced caution. The Guardian highlights how BNPL services, like Klarna, can lead to debt accumulation that becomes hard to track and manage. By reducing friction at the point of sale, these services encourage purchases that might otherwise be deferred. In a 2020 report, financial expert Martin Lewis warned of BNPL's potential pitfalls, particularly when young or financially vulnerable shoppers use these services without fully understanding the repayment obligations and potential fees. Integrating these options with Apple Pay might obscure this visibility even further, allowing for debt to accumulate under the guise of “affordable” instalments.
Moreover, Klarna’s CEO previously called out Apple when the tech giant announced it was working on its own BNPL offering, “Apple Pay Later,” which has since been shelved. Klarna described Apple’s venture into the BNPL space as "plagiarism of the highest form of flattery,” a rare but telling comment that underscores the competitive landscape among fintech and digital payment providers.
With Klarna now woven into Apple Pay, questions remain as to whether this close integration could further encourage BNPL usage in a way that favours Apple’s business interests while compromising consumer caution.
Will Other Payment Giants Follow Suit?
Apple’s adoption of Klarna could inspire other digital-first payment providers to explore similar integrations.
PayPal, a major player in the digital payments space, already offers its own BNPL options, but it has yet to integrate directly with a major mobile wallet in the way Klarna now has. Other providers may also see this partnership as a signal that embedded, flexible payments are the future of mobile wallets and digital finance.
For consumers, this expanded field of digital payment options can be both empowering and overwhelming. With BNPL choices growing across platforms, and likely soon to span more major players, consumers will have unprecedented access to credit at their fingertips - along with the responsibility to use it wisely!
How to Add Klarna to Apple Pay in the US and UK
If you're eager to take advantage of this integration, setting up Klarna with Apple Pay is a straightforward process. Here’s how to get started:
Step 1: Download the Klarna app from the App Store, if you haven’t already. After downloading, create an account or log in to your existing Klarna account.
Step 2: Once logged in, navigate to your Klarna Wallet within the app. There, you’ll see an option to add a Klarna “one-time card” or connect Klarna as a payment method for Apple Pay.
Step 3: Select “Add to Apple Wallet.” This will prompt Klarna to generate a virtual one-time card that you can use specifically through Apple Pay. This card functions like a standard debit or credit card, but it is specifically linked to Klarna’s payment plans, allowing you to choose your preferred repayment option.
Step 4: Verify your identity if prompted, following Klarna’s security steps to complete the setup.
Step 5: Klarna will now be available as an option within Apple Pay when you checkout at participating retailers, both online and in-store, using your iPhone, iPad, or Apple Watch.
By following these steps, US and UK consumers can easily access Klarna's BNPL options directly from Apple Pay, making the process of purchasing with flexible payments faster and more integrated than ever.
Is Bringing BNPL Closer to the Consumer a Positive Development?
Apple’s Klarna integration undeniably makes BNPL more accessible and may lead to higher conversion rates for retailers. However, it also raises questions about the broader societal impact of embedding credit access so directly into everyday transactions. With Klarna now integrated into a platform as ubiquitous as Apple Pay, the line between spending cash and taking on credit blurs.
Financial experts warn that as payment methods evolve, they tend to make spending feel increasingly intangible. Contactless payments and one-click digital transactions have already shown a tendency to disconnect consumers from their spending behaviors, and BNPL services may further encourage the illusion of “affordable” spending, even on items people may not truly need. This trend could disproportionately impact younger or financially inexperienced consumers who may not fully understand the implications of these purchases until they begin to add up.
As digital payment providers continue to expand their partnerships, it's essential to consider not only the convenience these options bring but also the potential for accumulating debt in a low-visibility environment. Are we making payment too easy—and are we ready for the consequences of bringing BNPL even closer to consumers through major mobile wallets like Apple Pay? This development represents a turning point in digital payments, and as consumers, businesses, and regulators, it’s worth asking: how can we embrace the benefits while mitigating the risks?
What do you think of this move to directly integrate BNPL options within Apple Pay? Let me know in the comments.
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