What: Klarna partners with Adyen to expand buy now, pay later services into physical retail stores across Europe, North America, and Australia.

Why it is important: The move highlights the growing convergence of fintech and traditional retail, offering consumers more flexible payment options and challenging retailers to adapt their financial services in an increasingly competitive market.

Swedish fintech Klarna is partnering with Dutch payments provider Adyen to bring its popular buy now, pay later (BNPL) service into physical retail stores. This collaboration will make Klarna's payment products available across more than 450,000 Adyen payment terminals in brick-and-mortar locations, initially launching in Europe, North America, and Australia.

Klarna's BNPL service allows users to spread the cost of purchases over interest-free instalments, a feature primarily associated with online shopping. By expanding into physical stores, Klarna aims to offer consumers the ability to use their service "at any checkout, anywhere," according to David Sykes, Klarna's chief commercial officer.

This move comes as Klarna and other BNPL firms seek to expand their reach beyond e-commerce. The partnership builds on a previous arrangement between Klarna and Adyen for online payments. It also aligns with Klarna's recent strategic shifts, including the sale of its online checkout solution and the introduction of a checking account-like product.

While BNPL services have faced criticism over concerns about promoting overspending, regulators are pushing for rules to bring this fast-growing payment method into regulation.

IADS Notes: The adoption of Buy Now, Pay Later (BNPL) services and flexible payment options is rapidly expanding across the retail sector. As seen with Sainsbury's introduction of BNPL options through Klarna for its Argos, Habitat, and Tu clothing brands, major retailers are embracing these payment solutions to enhance customer flexibility. This trend is supported by research showing that instalment plans linked to credit cards significantly boost sales and customer satisfaction, with 76% of merchants expecting increased use of these plans. However, as BNPL services mature, they face challenges, including profitability concerns, rising interest rates, and growing regulatory scrutiny. The sector is also broadening its user base beyond younger consumers, indicating a wider acceptance of these payment methods. These developments reflect changing consumer payment preferences and the retail industry's adaptation to meet evolving financial needs.

Klarna brings buy now, pay later into physical stores