As digital payments become more and more commonplace in the modern era, the rise of app-based payment platforms has made major waves. With more and more different companies entering the market, it has become increasingly difficult to decipher which ones are worth using and which ones are not. Especially considering the choice involved linking bank accounts or credit cards, the allure and potential downfalls of any given app-based payment platform has become more important as they become more integrated into the world. With established platforms such as PayPal, Venmo, and CashApp, and newcomers like Quadpay, Klarna, and Affirm, what are the benefits of payment apps, and what does the future hold for them?
Up and Coming Players and the Appeal of Payment Apps
As more apps flood the market offering similar services, it is difficult to parse through and see what makes each unique and how they are then doing as a company. For instance, the Swedish company, Klarna, has seen major growth in the recent past garnering an impressive $10.65 billion. While that is not much in comparison to established companies like PayPal, which currently has a market cap of $238.227 billion, there are major signs that Klarna will be a major name sooner rather than later. After their valuation, Klarna raised $650 million led by Silver Lake, Singaporean sovereign wealth fund GIC, and others. Their report earlier in the year announced the company had over 200,000 different active merchants, including major brands such as Samsung, Nike, IKEA, and Ray-Ban.
A similar surge in growth can be seen in Quadpay, a United States payment app with a similar concept. Quadpay has made major decisions recently to equip the company for expansion. One of these decisions was appointing the former PayPal executive, Laura Kane, to the position of senior vice president. In the meantime, Quadpay’s customer numbers grew by 33% in the most recent quarter. Quadpay also recently merged with Zip Co Ltd, which helped explode its overall customer base to an excess of 4 million users with 26,000 different merchant partners. These contributing factors have led to Quadpay securing a revolving line of credit from Goldmann Sachs worth up to $200 million. Both Quadpay and Klarna offer similar benefits for the consumer, with the notable exception basically being where the companies are based.
The allure of both companies comes from merchant partnerships and interest rates for payments. The main hallmark of each service is the ability to segment payments, essentially becoming an alternate option to traditional credit with more transparency as to when payments on any outstanding purchases or debt ends. Instead of purchasing something all at once with a credit card, using Quadpay or Klarna, a consumer can pay in multiple installments that can be scheduled by them. For Klarna, the “buy now, pay later” motto has made them the number one partner of choice for the highest-grossing 100 businesses in the United States. Their model allows for payments to be made in three or four installments over the course of a few months with 0% interest. Quadpay has a near-identical model with four payments over six weeks, also with 0% interest. Both Quadpay and Klarna make money from very few sources besides late fees if the consumer misses a scheduled payment.
While perhaps the most significant new player with near-identical features to each of these is Affirm, created by PayPal co-founder Max Levchin, both of these companies being in the market at a high level suggests that there is still room to grow. Affirm is currently valued at $3 billion but is expected to reach nearly $10 billion in its initial public offering (IPO). With $300 million raised in 2019, Affirm is set to make just as many waves, if not more, than competitors like Klarna and Quadpay.
Payment apps have been taking a larger and larger portion of users since their inception. Especially. as they grow more secure, connected, and accessible with major retail companies, the appeal is obvious. The creation of alternatives to traditional lines of credit for smaller purchases can be extraordinarily appealing for many shoppers who prefer it for the lack of interest and transparency with payment plans. Companies like Klarna, Quadpay, and Affirm all represent the market potential as each continues to scale up their own operations.
Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.