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The major buy now, pay later platform Klarna AB said early Tuesday it has created a stablecoin, KlarnaUSD, joining in what has become a movement in the payments business this year toward this form of cryptocurrency.
The launch of the new coin, which Klarna says will be leveraged at least in part to reduce its cross-border transaction fees, comes as stablecoins have acquired considerable momentum in recent months. Companies increasingly view them as alternatives to traditional finance, while new rules for stablecoins adopted by the U.S. Congress this summer has also lent momentum to the digital currency, which reflects the value of an underlying currency, such as the dollar.
The new coin is intended to be launched next year on Tempo, a new blockchain developed by the payments company Stripe Inc. in tandem with the investment firm Paradigm Operations LP. Another partner in the venture will be revealed “in coming weeks,” Klarna’s announcement says.
“Klarna has the scale to change payments globally. With Klarna’s scale and Tempo’s infrastructure, we can challenge old networks and make payments faster and cheaper for everyone,” says Klarna’s co-founder and chief executive, Sebastian Siemiatkowski, in a statement. The move into stablecoins, he adds, is “the beginning of Klarna in crypto.” The payments company claims 114 million customers for its BNPL services, generating $112 billion in gross merchandise value annually.
One advantage behind the new venture is that it could significantly reduce cross-border transaction fees, Klarna says, an expense that has amounted to $120 billion annually for all providers. “Klarna sees stablecoins as a way to dramatically reduce costs for both consumers and merchants,” the company said in its announcement.
“It certainly makes sense. It’s going to save money for [Klarna] moving money,” notes Cliff Gray, principal at Gray Consulting.
“The cross-border angle makes a lot of sense,” agrees Aaron McPherson, principal at AFM Consulting. “That’s where I see a lot of stablecoin payments going,” he adds, because “it reduces the cost of payment acceptance” for all parties. This is particularly the case for wholesale settlement, he adds.
Klarna’s venture into stablecoins comes even though Semiatkowski had established a position as a severe critic of cryptocurrency. But the company’s own announcement notes an estimate from the research firm McKinsey indicating stablecoin transactions are exceeding $27 trillion annually. With further momentum, the payments company says, stablecoin transactions “could overtake legacy payment networks before the decade is out.”
Indeed, the major payments networks are already seeing increasing stablecoin flows. Visa Inc. alone added settlement support earlier this year for four new stablecoins, running on four separate blockchains, its chief executive said last month. The company said it supports more than 130 stablecoin-linked card-issuing programs in more than 40 countries.
Klarna’s move toward crypto, meanwhile, comes as the Sweden-based company earlier this month reported more than $900 million in quarterly revenue, up 26% year-over-year, the highest revenue figure in its 20-year history. It processed $32.7 billion in transaction volume, a 23% increase.
