Affirm shares drop on reports Walmart partners with Klarna

Investing.com -- Affirm Holdings (NASDAQ: NASDAQ:AFRM) shares tumbled 13% Monday morning following news that Walmart (NYSE:WMT) will partner with Klarna, replacing Affirm as its buy-now-pay-later (BNPL) provider in the U.S.

The shift in partnership was reported by CNBC and Dow Jones, indicating that Swedish fintech Klarna will become the exclusive BNPL loan provider for Walmart, a significant blow to Affirm’s business. Klarna’s integration into Walmart’s operations is expected to be fully scaled by the holiday season, positioning it as the retailer’s sole BNPL offering by year-end.

This development comes as Klarna prepares for a public listing in the U.S., marking a pivotal moment for the company amid a challenging period for fintech valuations. Klarna’s move into Walmart’s ecosystem is strategic, as it will provide loans through the retailer’s majority-owned fintech startup OnePay, which recently updated its brand name from One. Klarna will manage the underwriting for loans with terms ranging from 3 to 36 months and annual interest rates between 10% and 36%.

The partnership is particularly timely for Klarna, as it gears up for one of the most anticipated IPOs of the year. After a slump in major tech listings in the U.S. since 2021, Klarna’s IPO will serve as a significant test for the fintech sector. The company’s valuation has seen dramatic fluctuations, soaring to $46 billion in 2021 before plummeting by 85% the following year amid a broader downturn in high-growth fintech stocks.

The news underscores the intensifying competition in the BNPL space, where Affirm has been a dominant U.S.-centric player since its public debut in 2021, while Klarna boasts a more global network. The transition of Walmart’s BNPL services to Klarna is expected to enhance the rivalry between the two firms as the market continues to evolve.

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