Virtual cards are increasingly gaining popularity as an alternative payment method in recent times. These are unlike traditional cards, which do not need any physical form to operate and offer a higher level of security as the actual credit card number remains unrevealed to the retailer. Moreover, from a sustainability point of view, virtual cards abolish plastic usage, unlike traditional cards. Consequently, fintech companies are introducing virtual cards to minimize costs and expand their consumer base.
The trend is also emerging in the buy now, pay later (BNPL) market. In December 2021, Klarna, one of the key players in the BNPL space, entered into a strategic partnership with Marqeta, a United States-based fintech company to launch one-time virtual credit cards. The company will introduce these cards in 13 new European jurisdictions, namely, Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Poland, Spain, and the United Kingdom.
In May 2021, Klarna collaborated with Marqeta to launch Klarna’s shopping app in the United Kingdom. Marqeta also assisted Klarna in its Australian launch in 2020 and its extension into the New Zealand market. It is noteworthy to mention that since 2018, Marqeta has issued approximately 320 million cards. Consequently, the partnership and the virtual credit card are expected to strengthen Klarna’s base in Europe.
With the help of internet-enabled devices, customers can make purchases with the one-time virtual credit cards in Klarna’s mobile shopping app. Klarna uses the Just-in-Time (JIT) Funding feature of card issuing platform Marqeta to complete the entire transaction, together with the flexible technology and suite of more than 300 open APIs to provide a personalized experience to the consumer. This unique feature of Marqeta will help the BNPL player expand its business and increase its share in the European market.
In the first half of 2021, the GMV of Klarna reached US$39 billion globally, an increase of 77% YoY. Despite the fact that the company witnessed growth in user base and volume transactions, the company is facing challenges to make a significant profit. As a part of the new strategy, the company’s partnership with Marqeta for the virtual credit card is expected to support its financials in the medium to long term.