“Extortion scheme”: Afterpay and Klarna engage in war of words

Klarna and Afterpay are butting heads as market competition is getting fierce across the globe.

The war of words started with Sebastian Siemiatkowski, CEO and co-founder of Klarna, accusing the Afterpay of having extortionate fees, telling the Australian Financial Review that he was surprised “people are celebrating the success of some of your local players when they are charging 400 basis points [to retailers].”

The Klarna founder then argued that the Reserve Bank allowed merchants to pass on fees to customers and to get rid of BNPL fees altogether in order to improve competition, Business Insider reported.

“To me, it’s not just about surcharging, it’s about capping – because that’s not a payments scheme any more, that’s an extortion scheme,” Siemiatkowski said, in reference to Afterpay’s current model.

It didn’t take long before AfterPay replied, with CEO Anthony Eisen labelling the claims as “disingenuous and desperate”, wondering why, if the situation was so bad, “more merchants choosing us then in the US and Australia?”

Business Insider’s Jack Derwin noted that while Afterpay has a clear home field advantage in Australia, with it having 48,000 merchants under its wings compared to Klarna’s 500, that may be an unfair advantage given the Swedish FinTech unicorn only launched in Australia in January.

Klarna’s arrival into the Australian market was made possible in part by a $200m investment from Commonwealth Bank. As part of that deal, Klarna’s instalments offering has been integrated into the bank’s offering.

Comparatively, Afterpay only entered Europe in August this year on the back of its acquisition of Pagantis and now boasts having about 1,400 merchants on its books whereas Klarna, which has been active across Europe for years, have 200,000.

The verbal spat between the two BNPL ventures comes as the market is heating up.

For starters, Klarna raised a $650m round and achieved a $10.5bn valuation on the back of it, giving it a comfortable lead against other competitors for the title of being Europe’s most valuable privately owned FinTech venture.

Klarna is also rumoured to be gearing up for an initial public offering within the next two years.

Since then, payments giant PayPal, small business lender iwoca and Danish neobank Lunar have launched instalment products of their own.

Moreover, this summer saw payment-splitting companies Split and Tabby both enjoy new investments.

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