Klarna Group (KLAR 9.49%) has established itself as a leading buy now, pay later (BNPL) fintech. The Swedish company's services continue to generate demand as people look to break down everyday purchases into small payments spread out over a few months. But Klarna hasn't fared well in the stock market so far. It's down by more than 30% since its September initial public offering (IPO).
It's not because of a defect with the stock specifically. For instance, fellow BNPL stock Sezzle is down roughly 20% from the price it had on Sept. 10, the same day of Klarna's IPO. Sezzle was also down by more than 40% from Sept. 10 to its October bottom.
While most people don't want to see their favorite assets lose value, buying Klarna could be a smart move for patient investors. Here are some of the factors that can help the BNPL stock outperform the S&P 500 next year.
Demand for the Klarna Card is accelerating
Image source: Getty Images
The Klarna Card came out in the U.S. on July 4 and has been a hot product ever since. It is just like a credit card, except you can decide if you want to pay the balance right away or break your purchase into small installments.
The card passed 1 million U.S. sign-ups in its first 11 weeks, and momentum has continued to build. By four months, the card had 4 million new sign-ups.
NYSE: KLAR
Key Data Points
The fintech company made that announcement while sharing third-quarter results, which were also positive. Revenue increased 28% year over year, while U.S. revenue in particular surged 51%.
The Klarna Card is one of the catalysts that boosted the company's U.S. revenue. It's still a new product, and Klarna says it has 114 million global active users, so it can still give out cards to plenty of its users.
The card has also received mainstream acceptance from businesses, since it’s accepted anywhere Visa can be used. Furthermore, over 850,000 retailers integrate Klarna directly into their checkout. This financial product should continue to be a tailwind in 2026 and beyond. It makes BNPL easier to access.
Many users came in Q3
That base of 114 million active users results in significant revenue and sets the stage for added growth, as Klarna told investors that it added 27 million new users in the quarter.
We don't know how many total users (active plus inactive) Klarna has. However, if most of those 27 million users remain active customers, and the fintech can continue to grow at that pace, its user base should expand meaningfully in 2026.
Active users aren't the only segment of the company that is growing quickly. It also added 235,000 new merchants and now has over 850,000. As more businesses integrate Klarna in their checkout, more consumers will hear about the fintech and decide to give it a try.
Management's efforts to reach new users are working, and it's a big reason the company expects to exceed $1 billion in fourth-quarter revenue.
Could the BNPL industry collapse like a house of cards?
Some bears will argue that the BNPL industry will eventually collapse. High costs of living prompt people to look for ways to save money, and Klarna appears as a solution: Take any purchase and break it into four monthly payments.
However, it may cause people to live beyond their means and get deep into debt. Breaking trivial purchases into four payments may indicate financial vulnerability, and the BNPL model can exploit it. Eventually, the house of cards comes falling down when enough people can't keep up with the payments on top of regular expenses.
However, Klarna's data suggests that the bears are overexaggerating. Last year, the company said that it had a 99% repayment rate globally. It also told investors that it performs strict eligibility assessments before letting a purchase go through. Artificial intelligence helps with this part.
Some people pay late fees for BNPL products which can add up. Still, the idea of the BNPL industry being unsustainable looks like a fantasy at this point. In the meantime, Klarna continues to deliver impressive results and seems like a promising growth stock heading into 2026.
