Klarna, the Swedish fintech giant, has secured an exclusive partnership with retail behemoth Walmart to provide buy now, pay later loans to its customers, edging out rival Affirm in the process. The news comes on the heels of Klarna's IPO filing, marking a significant milestone in its expansion into the US market.

The partnership will see Klarna provide loans to Walmart customers through OnePay, a fintech startup in which it owns a majority stake and is also backed by Ribbit Capital. The transition is expected to take place "later this year," according to a statement from Klarna. This move is a significant blow to Affirm, which had previously held the partnership with Walmart.

Affirm's stock took a hit on the news, plummeting 8% by early afternoon on Monday, trading at just over $46. The San Francisco-based company has been a major player in the buy now, pay later space, having gone public in 2021 and recently announcing a GAAP net income of $80 million.

In contrast, Klarna has made a remarkable comeback after suffering a massive blow to its valuation, reporting a net profit of $21 million in 2024, a significant swing from a loss of -$244 million in 2023. The company's global reach and push into the US market have contributed to its resurgence.

Affirm CEO and co-founder Max Levchin has previously emphasized the importance of differentiating his company from competitors, including Klarna. In an interview with PaymentsDive last September, Levchin highlighted Affirm's focus on earning revenue from individual transactions, unlike Klarna, which he claimed relied on marketing revenue. However, a Klarna spokesperson disputed this assertion, stating that "the bulk of Klarna's revenue comes from transactions, with a smaller portion drawn from marketing."

Levchin also emphasized Affirm's commitment to not monetizing transactions through advertising or marketing, instead focusing on building a business model that prioritizes financial sustainability. "I'm not criticizing – it's not my place to decide those are bad businesses," he said. "But I love ours, and ours is built around the idea that, ultimately, every transaction needs to make sense financially."

Klarna's global reach, which extends beyond the US, has been a key factor in its success. The company has made significant inroads into the US market, with the country representing one of its largest markets alongside Germany. In an interview with TechCrunch last April, Klarna revealed that the US was "gaining all the time and is often largest on a quarterly basis."

The partnership with Walmart is expected to significantly boost Klarna's presence in the US. As the world's largest retailer by revenue, Walmart reported $441.8 billion in US sales alone last year. According to Klarna, just 5% of Walmart's US volume would increase its total GMV (gross merchandise value) by 28%.

The implications of this partnership are far-reaching, with Klarna poised to become an even more dominant player in the buy now, pay later space. As the fintech landscape continues to evolve, this move is likely to have significant repercussions for competitors and the industry as a whole.

In conclusion, Klarna's exclusive partnership with Walmart marks a significant milestone in its expansion into the US market, edging out rival Affirm in the process. As the company continues to grow and evolve, its impact on the fintech industry is likely to be felt for years to come.