The news: Klarna rolled out two products in the UK, per a press release.

• Klarna balance acts like a quasi-checking account that customers can load to fund purchases or deposit rewards.
• Klarna Card is Klarna’s BNPL-linked debit card. Shoppers can use the card in-store and then convert transactions into installment plans.

Both products were already live in the US and parts of Europe.

Why this matters: BNPL use is gaining traction among UK consumers, but it still has limited access to in-store retail—where the overwhelming majority of shopping still takes place.

• BNPL use by UK adults surged from 14% in 2023 to 25% in 2024, per UK Finance data published last month.
• Use was strongest among young consumers, but growth was fastest among those ages 55 to 64—doubling from 10% to 21%.

We forecast UK retail ecommerce makes up just under one-third (31.1%) of all UK retail sales, at $236.5 billion. That share hardly budges up to 31.5% by 2029, which means if BNPL wants to take meaningful market share from other payment methods, it needs to move in-store where the remaining 69.9% of transactions take place.

What this means for issuers: The UK is a far smaller credit card market than the US. Credit card spend totaled £75.1 billion ($95.96 billion) in the UK last year, per UK Finance—versus a resounding $3.674 trillion in the US, per our forecasts.

More concerning for them than the BNPL transaction growth is Klarna’s emphasis on what it calls “balances.” Klarna is a real bank in the EU and recently was granted an Electronic Money Institution license in the UK.

That means even without getting a bank charter in the UK—or the US for that matter—it can use its existing bank infrastructure to offer a robust suite of bank-like services in the style of Cash App or even Apple Wallet. It won’t have the bona fides of FSCS or FDIC protection unless it works with a bank partner or applies for a charter in the UK or the US, but its growing popularity for online and now in-store checkout could make it a stickier fintech banking solution than competing digital wallets.