Is the Klarna / Flybuys partnership the future for ASX BNPL providers?

Could buy now, pay later payment provider Klarna Australia’s partnership with Flybuys signal a new direction for ASX BNPL providers?

| More on:
Future ASX share price represented by lady in red scarf stares into crystal ball

Image source: Getty Images

Earlier this week, buy now, pay later (BNPL) payment provider Klarna Australia announced it has partnered with Flybuys in what the company is calling a “revolutionary” arrangement. But, what does this mean for ASX-listed BNPL shares?

Flybuys, a subsidiary of Coles Group (ASX: COL) and Wesfarmers Ltd (ASX: WES), has agreed to provide Australian Klarna users 3 Flybuys points for each Klarna ‘vibe’ point they transfer into their Flybuys account.

The deal is the first of its kind for an Australia-based BNPL company. Let’s take a closer look at the agreement between Klarna and Flybuys.

What is Klarna?

Klarna Bank is a Sweden-based FinTech with its headquarters in Stockholm. The company made headlines in Australia last year following news Commonwealth Bank of Australia (ASX: CBA) had taken a stake in it and when the Klarna platform officially launched here.

As previously reported by The Motley Fool Australia, Klarna is worth around US$31 billion to US$40 billion.

Every Klarna user gets a trophy

Klarna was the first of its kind to implement its own rewards system, and now it’s the first to implement someone else’s.

Klarna launched its ‘vibe’ rewards club in Australia in October 2020, offering users one vibe for every dollar spent through the BNPL platform. Now, the company has partnered with Flybuys, offering users the option to trade 1 vibe for 3 Flybuys points, though minimum transfer amounts apply.

According to Klarna, the concept encourages responsible spending since customers will only be rewarded for completed payments.

New Australia-based Klarna users who link their Flybuys account with the platform will receive 1500 Flybuys points upon the final payment of their first purchase.

Following the initial bonus, for their first 4 transactions, users must convert 250 vibes into 750 Flybuys points. After that, the next 4 transactions must convert at least 500 vibes into 1500 Flybuys points. Each conversion thereafter must consist of at least 750 vibes, with users receiving upwards of 2250 Flybuys points in return.

Klarna Australia country head Fran Ereira said the partnership is revolutionary:

Our partnership has been proudly designed for modern consumers. Shoppers want more flexibility in payment options so they can get what they want now, but they also want to be rewarded for taking this option. Klarna’s partnership with Flybuys will reward our customers by tripling their points collection and rewards potential.

Flybuys CEO John Merakovsky commented on the partnership, saying:

This partnership with Klarna opens up new opportunities for our members to collect points, and even more ways to be savvy with their shopping and be rewarded for it. We’re incredibly proud to welcome Klarna into the fold as our first buy now, pay later partner.

The partnership is set to take off in May, and all eyes will be on ASX-listed BNPL providers to see if they attempt to follow suit.

Will ASX BNPL companies follow Klarna’s lead?

Some BNPL providers already have their own, internally managed customer reward systems in place.

The largest listed on the ASX is Afterpay Ltd (ASX: APT), which offers top customers access to its Pulse rewards program. Pulse isn’t a points-based system. Rather, after completing 30 purchases through Afterpay and incurring no more than 3 late fees over 6 months, customers are invited to join the program. Pulse provides users with the benefits of more time to make payments, greater buying options and increased flexibility of payment.

The second-largest ASX BNPL provider, Zip Co Ltd (ASX: Z1P), doesn’t currently have a rewards system in place. However, it did offer its users 3% cashback from completed purchases between 16 November 2020 and 8 January 2021.

IOUPay Limited (ASX: IOU), the sixth-largest ASX listed BNPL provider by market capitalisation, has a typical rewards program. Within it, users earn points by shopping with the platform and can redeem them on future purchases through IOUPay.

Only time will tell whether competition among ASX-listed BNPL providers will heat up as a result of Klarna’s partnership with Flybuys, encouraging other big players in the space to seek out similar deals. 

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on BNPL shares