What is Klarna up to with Stablecoins?

Payments & Digital Assets

What does Klarna see in Stablecoins? New meaning for BNPL

My summary view is that the motivation is not a case of Buy Now, Pay Later — rather it is Build Now, Profit Later.

Olaf Ransome

Founder, 3C Advisory | Published on LiquidityFinder

The big retail payments player is dipping its toes into the stablecoin waters. They have announced a partnership with Coinbase: not big news. They are raising funding denominated in stablecoins: bigger news. And, they are creating their own stablecoin, bigger news as well.

When big players start to do interesting new things, it is time to dig in. In this article, Olaf shares some views on the "why bother" — and why this might be of interest to other treasuries.

What is Klarna up to?

First, Klarna announced a partnership with Stripe to create KlarnaUSD. Then came the partnership with Coinbase to accept stablecoins and to raise funding in stablecoins.

What difference might this make?

In card transactions, merchants do not get paid immediately and they are paid net of interchange fees — hugely variable, but easily 2 to 3%, with the usual hassle of weekends and holidays in between. When consumers elect to buy things using Klarna's Visa card, with or without the BNPL option, Klarna has to pay the merchants. So it needs working capital. Sometimes it will raise this funding at short notice. The better aligned Klarna's treasury is with the means of payment which institutional investors want to use, the easier and cheaper sourcing that funding becomes.

If Klarna has stablecoin funding on tap, it can encourage merchants to accept payment in stablecoin — either KlarnaUSD or another one. The attraction is instant payment: the whole 24/7 "always on" promise that on-chain digital assets bring.

For Klarna's CFO, holding long balances in stablecoins is generally less risky than holding long cash positions with a bank. A regulated stablecoin has broadly the same risk characteristics as a money market fund — secured and, as a securities-like holding, remote from any bankruptcy proceedings.

And, in general, correspondent banks do not really like their clients holding big, long cash balances. As an alternative, stablecoins are even more instantly available than cash at a bank.

The wallet-to-wallet play: If merchants are willing to accept a stablecoin for instant payment, Klarna could orchestrate a wallet-to-wallet transfer — eliminating interchange fees entirely. "Accept KlarnaUSD and you can have your money instantly" versus "accept stablecoins generally and we will credit you next business day."

On top of this could come additional incentives: a free custody service, discounted fees versus card interchange. Klarna earns on KlarnaUSD and merchants are happy to deal with them.

Agentic AI and programmable payments

"Agentic AI" is a term you may have heard. In simple terms: a machine will do something for you — and that something could involve a payment. For a consumer, this might be: "Buy tickets for a Rolling Stones concert in London as soon as you see an email in my inbox or a post on Ticketmaster." For a business: "Buy me cacao at $80 or better if you see it on offer from suppliers A, B or C." That is the "programmability" we have heard about. Stablecoins are a natural mechanism for those payments.

The next effect on the flywheel is a first derivative: the merchants' suppliers. In many niches today, businesses are already willing to do business in stablecoins — even USDT Tether — because their clients will pay in USDT or USDC and suppliers will accept the same. We could of course philosophise about some of those risks (for more, see Olaf's earlier article: Stablecoins and the "Pint Test": What S&P's USDT Rating Tells Us). Klarna is now offering an alternative.

Klarna's stated focus is on consumers — "to reimagine how consumers spend and save in their daily lives." The introduction of stablecoins extends that scope considerably, or perhaps rewrites the mission statement altogether: how we spend and save in our daily lives.

Just maybe, clients themselves can become a source of funding. Whilst there is a debate about whether stablecoin issuers may pay interest to holders, there would be no debate about Klarna paying a retail or corporate client to borrow those stablecoins.

In summary

My overall view of what Klarna is doing here is a variant on the standard meaning of BNPL: Build Now, Profit Later.

Building the infrastructure to operate financial services is never quick. In TradFi, adding a new correspondent banking relationship is almost invariably a marathon, not a sprint. Klarna's direction of travel might be described as: "New means of payment are evolving. We need to be able to use them, whether a lot or a little happens. And, just maybe, we might be able to drive something to happen."

"Preparing when you can and not when you have to is always a good strategy in financial services."

Olaf Ransome

Founder, 3C Advisory

Whilst your business is not the same as Klarna's, the thoughts here are intended to trigger your own thinking on what to do next.

With all things bleeding edge in financial services, there is every risk that some points have been missed or some conclusions are implausible. If so, please call it out — and do share a comment or two.

Please feel free to get in contact via LiquidityFinder here.

Olaf Ransome

Olaf is a liquidity and financial services expert and the founder of 3C Advisory. You can message Olaf directly here.

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