Dive Brief:

• Buy now pay later provider Klarna Group said Monday it is expanding its monthly membership program with more expensive plans that offer amenities such as cash back for spending and airport lounge access.
• The two new membership tiers will be available next month in the European Union and United Kingdom, and will come to the U.S. market by year’s end, a Klarna spokesperson said Monday. The various perks include up to 1% cash back on debit card purchases, travel insurance and subscriptions to The New York Times and other publications. The membership plans can be purchased independently, or added to a Klarna debit card holder’s plan.
• The membership tiers mark “a major step in Klarna’s evolution into a full-scale digital bank,” London-based Klarna said in the press release. The premium and max subscriptions in the U.S. will cost $17.99 and $44.99 per month, respectively. The European tiers are priced similarly in euros, Klarna said.

Dive Insight:

Last year, ahead of its New York IPO, the company sought to diversify its revenue sources with the recurring membership program. About one million people have previously signed up globally for the two older plans, Klarna said Monday in its press release. 

The new Premium and Max membership tiers offer the company – which became publicly traded last month – additional higher revenue streams atop the current Core and Plus tiers, which were introduced last year. Klarna charges $3.49 monthly for Core and $7.99 for Plus.

The highest-priced Max tier offers 1% cash back on all debit-card purchases.

While the initial roll-out is in Europe, the company’s largest market is the U.S. and it’s targeting the states for more growth, including by partnering with mega retailer Walmart.

Klarna is positioning the new membership tiers as a way consumers can access some features of premium credit cards without the high annual fees or spending targets many of the large banks’ cards offer. The plans are available without having a Klarna debit card, the spokesperson said. Klarna also has a separate credit card but users can’t attach the membership program to that card, the spokesperson said.

Klarna launched its Visa-branded debit card in early July in the U.S., and said it reached one million customers in 11 weeks. The company says it has about 111 million active users and 2.9 million daily transactions.

“We believe consumers shouldn’t have to take on expensive credit to access premium benefits,” Klarna’s chief marketing officer, David Sandström, said in the press release Monday. “For decades, exclusive perks such as airport lounge access, concierge-style subscriptions, and premium travel insurance were only available to elite credit card holders.” 

Klarna’s move into more premium amenities comes as two of the largest credit card issuers – American Express and JPMorgan Chase – revamped their card offerings this year with steeper annual fees and more dining and travel perquisites.

The benefits make Klarna’s plans “somewhat similar to premium cards,” like the ones from those banks, TD Cowen analysts led by Moshe Orenbuch wrote Monday in a client note. 

However, “card issuers likely have much better negotiating leverage with benefit providers than Klarna,” the TD Cowen team wrote. “On the other hand, charging on a per-month basis is less of a commitment/burden for the consumers than charging an annual fee in the case of premium credit cards.”

The new Klarna plans also offer a 16-gram metal debit card for account users who want a physical card. The user deposits funds with Klarna and then debits from those for purchases. A consumer can apply for a Klarna installment loan for transactions where the balance wouldn’t cover a purchase, the spokesperson said.

The lounge perk includes airport lounges operated through Lounge Pass, owned by London-based Collinson Group, which also operates the Priority Pass airport lounge network.