Stripe and Klarna have struck a global payment deal to expand their reach before Klarna's upcoming U.S. IPO.

• Klarna, a Swedish fintech unicorn, announced a major new distribution partnership with U.S. payments firm Stripe on Tuesday.
• Stripe will enable Klarna to provide its buy now, pay later services to merchants in 26 countries through its payment tools.
• Klarna received a significant boost from its new partnership at the time of its highly anticipated US IPO.

Stripe and Klarna have formed a significant new distribution partnership, with the aim of increasing reach and attracting more merchants prior to Klarna's U.S. listing.

Stripe and Klarna have announced that Klarna's buy now, pay later (BNPL) service will be available as a payment option for merchants in 26 countries using Stripe's payment tools.

Klarna and Stripe have previously collaborated, with Stripe announcing in 2021 that Klarna would provide its BNPL plans to Stripe's U.S. merchants during the peak of the Covid-19 pandemic-driven fintech boom.

Installment loans, known as BNPL plans, enable consumers to purchase items online or in-store and pay off their debt over time, either in the future or through equal monthly installments. These arrangements have gained popularity among individuals looking to spread the cost of everyday purchases.

Klarna has received a significant boost from its new partnership with Stripe as it prepares for its highly anticipated initial public offering. The company confidentially filed to IPO in the US in November and could potentially achieve a valuation of up to $20 billion, according to a Bloomberg News report from last year.

Klarna earns revenue from the fees charged to retailers for each transaction processed through its platform. In exchange for featuring Klarna as a payment option in its checkout tools, Stripe will receive a portion of the money Klarna generates from a specific transaction.

Klarna declined to disclose financial terms of its deal with Stripe.

Klarna has doubled the number of new merchants in three months since implementing the new integration with Stripe in October, according to David Sykes, the company's chief commercial officer.

We have added 100,000 new merchants in 2024 and the growth rate is already increasing with this agreement.

Klarna, founded in 2005, was recently valued in the $15 billion range. The company's peak valuation during the pandemic-led surge in fintech stocks was $46 billion in a funding round led by SoftBank's Vision Fund 2 in 2021.

In 2022, Klarna received an 85% funding cut, valuing the company at $6.7 billion.

Stripe could also benefit from incremental revenue gains through the deal.

Advocates of BNPL claim that these strategies will boost the number of transactions by allowing customers to purchase more items within a shorter time frame and then pay them off over an extended period.

Last year, a study by Stripe revealed that businesses using BNPL as a payment option could increase their revenue by up to 14% through higher conversion rates and average order values.

Stripe's BNPL volume grew 172% last year, much faster than other mainstream payment methods, as Jeanne Grosser, chief business officer of Stripe, told CNBC. Additionally, the deal with Klarna was a "win-win" for both companies.

Stripe has been speculated as a potential IPO candidate, but the company claims it's not in a hurry. Despite a decline in fintech valuations, Stripe reduced its valuation from $95 billion in 2021 to $50 billion in 2023. However, the company's valuation reportedly increased to $70 billion after a secondary share sale.