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Payment providers with financial media networks (FMNs) like Klarna, PayPal, and Chase may face restrictions on data they can share with advertisers, potentially limiting the FMNs鈥� revenue opportunities. Expands credit access. The new rule lets credit card providers make decisions based on data held by other FIs, like a consumer鈥檚 income and expenses.

Brands like Nike, Coca-Cola, Klarna, and Cadbury have already embraced AI in various forms. Klarna鈥檚 use of AI has saved $10 million annually by cutting down costs related to external agencies and increasing efficiency in content creation. In another example, Coca-Cola's "Create Real Magic" campaign used AI tools to allow consumers to personalize ads, driving strong user engagement.

Klarna. Mintel. Opinon Matters. PayPal. RBC Capital Markets. Retail Economics. SAP Emarsys. Toluna. USwitch. Worldpay. YouGov.

In an extreme case that could foreshadow changes for the ad industry, payments firm Klarna laid off thousands of employees and curbed ad costs by leveraging AI.

Klarna uses AI to streamline customer service and reduce costs. By utilizing content structured in Contentful and AI-powered assistants, Klarna AI fielded 2.3 million customer service chats in its first month, Phillips said. This shift will save Klarna an estimated $40 million this year.

Zooming out: PayPal Ads is also part of a larger trend in financial services, with players like Klarna, Revolut, and Chase launching financial media networks (FMNs). FIs see advertising as a way to diversify revenue streams as traditional profit margins come under pressure. This launch is also part of PayPal鈥檚 鈥渢ransition year,鈥� focused on driving profitable growth.

Klarna, for example, charges a late fee if a payment is more than 10 days late. Extending this time frame could eat into Klarna鈥檚 revenues. Unanswered question: The CFPB didn鈥檛 directly address Klarna鈥檚 concerns about dispute periods. Providers just have two billing cycles to handle a dispute.

I think networks like Klarna have an advantage here because they've been building out kind of their own shopping experience within their app for a few years now. And so they've already got this kind of ecosystem where customers are going, they're looking for things.

Third-party providers such as Klarna and ClearPay are adding shopping features to their online platforms, encouraging retailers to leverage them to drive discovery and engagement. Klarna recently added a TikTok-like discovery feed powered by AI and a Shopping Lens visual search feature to its UK app.

Klarna. Kyra. McKinsey & Company. Near. Nepa. Nielsen. RSM. The Grocer. Toluna.

Yes, but: While Salesforce and Klarna are among the many companies betting on AI-powered customer service, consumers are less enthusiastic. A survey of Morgan Stanley interns found that the overwhelming majority鈥�93%鈥攑refer to speak to a human regarding a customer service query, per Business Insider. Three-quarters said chatbots failed to solve their issues at least half of the time.

Payments company Klarna has resolved to streamline its operations with AI, stating it wants to cut an additional 2,000 jobs.

PayPal, Revolut, and Klarna now offer marketplaces of goods or services based around payment solutions. Social apps boost shopping functions. Social commerce is a decade old, but better integration with payments and fulfillment services led to a healthy 26.3% growth rate in 2023. Services apps join the fun.

Klarna. PYMNTS.com. SoFi. The Motley Fool.

But Klarna knows it needs to get its finances in better shape: It laid off 10% of staff, about 700 people, in May. Klarna raised money, but its valuation plummeted. Klarna raised $800 million at a $6.7 billion valuation in July, a sharp drop from the $46 billion high it reached in June 2021.

A handful of FIs, including Klarna and Revolut, have been developing FMNs since 2023. But in spring 2024, financial titans Chase and PayPal each launched one, positioning FMNs as an industry game changer. Growing demand and regulatory clarity will encourage more FMN launches this year.

Apple鈥檚 BNPL debut may worry incumbent providers like Affirm and Klarna, which have yet to turn a profit. Tumbling valuations have rocked the industry. BNPL firms like Klarna and Affirm have seen their valuations slide as market volatility rattles the tech sector.

Just last week, we wrote about how Klarna is leaning into affiliate marketing revenues to boost profits. And it worked: Klarna achieved profitability in May鈥攊ts first month of profit since August 2020, per its H1 2023 results. Like Klarna, Affirm is also hoping to diversify its revenues, but it鈥檚 just taking a different strategy by banking on subscription revenues and the Affirm Card. Will it work?

Example: Klarna. 鈥淗istorically, we鈥檝e connected merchants and consumers through our payments and ecommerce services,鈥� said David Sandstrom, chief marketing officer at the payments company. 鈥淏ut we have so much data that we can now connect them through advertising as well.鈥�. Klarna will have 42.8 million US users this year, nearly a fifth (19.3%) of all digital buyers, per our forecast.

Klarna. LocalCircles. Ninja Van. NTTCom Research. Seoul Metropolitan Government. The Korea Bizwire.

Klarna. Lloyds Banking Group. LTK. Nepa. PayPal. Savanta. Snap Inc. Toluna. The Retail Technology Show. YouGov.

Affirm recently partnered with an eyewear retailer, for example, and Klarna partnered with a B2B car-rental company. Greater acceptance. BNPL debit cards and partnerships like Affirm鈥檚 with Walmart have made it easier to use BNPL in stores. What鈥檚 next? All of these drivers will boost BNPL鈥檚 growth throughout 2024.

Affirm notched three sequential quarters of profitability while Sezzle reported five, and Klarna posted a profit for the first time since 2019. Much of that profit didn鈥檛 come directly from BNPL transactions. For multiple quarters, Klarna cited merchant services鈥攚hich includes things like advertising鈥攁s its fastest-growing revenue stream.