Klarna, the Swedish company that pioneered the business model of “BuyNowPayLater” (BNPL), finally went public last week, 20 years after founding.
Klarna’s current market cap of US$17 billion is less than half of its peak valuation of US$46 billion in 2021.
You might remember that in 2020 and 2021, at the height of the pandemic-induced capital bubble, BNPL was a hot VC investment target in Southeast Asia as well.
Indonesia-focused startups FinAccel (Kredivo) and Akulaku were funded hundreds of millions of dollars by Mizuho Bank and Alibaba fintech affiliate Ant Group respectively. Advance, which owns BNPL service Atome, raised over US$400 million in a Softbank Vision Fund-led round in 2021.
An Indonesian ecosystem map we drew in 2021 – things are very different now
Singapore startup Shopback, funded by Temasek, Rakuten Capital, EDBI and East Ventures, also jumped in after seeing the fundamental similarities between the cashback and BNPL models. (i.e. both models charge merchants a fee and return part of that as benefits to consumers).
Investors were inspired by the traction of not only Klarna, but also US-based Affirm (which secured a partnership with Amazon), and Australia’s AfterPay, which was acquired by Square (now Block) for US$29 billion in 2021.
We built this slide in October 2021
And do not forget Southeast Asia’s three regional internet giants – Sea Group, Grab and GoTo – each dipping their toes into the service as well.
For these tech majors, there was a practical need to improve customer conversion (offering credit is a good way), and monetise the customers (merchants can pay a fee for increased conversation, consumers might pay an interest?).
Some of our friends in the Momentum Works community even had a debate on the prospects of BNPL, which is captured in the (aptly titled) article “you either die a hero or live long enough to become the villain”.
Tech giants dominate
Fast forward to September 2025, none of the above-mentioned BNPL startups in the region has exited, to the great agony of investors who put money into the sector.
“Can an independent BNPL player survive on its own?” – We asked this question in 2021
This is in contrast to Klarna, and also Affirm, whose share price doubled in the last year.
Rising interest rates is definitely a big factor here: capital becomes more expensive for these startups, and their own investors become more cautious in putting in more money. Merchants in different parts of the region, for slightly different reasons, also struggle to find willingness to pay an additional fee.
The giants, on the other hand, are doing well. Sea Group’s digital financial services affiliate expanded its loan book to US$6.9 billion by June 2025, with a non-performing loan (NPL) ratio of 1%; Grab’s financial services arm disbursed US$721 million in loans in the second quarter of 2025, up 44% from a year earlier; meanwhile, GoTo Financial consumer loan book reached about US$400 million by June 2025, almost double the level a year earlier.
That outcome is definitely not a surprise. We previously explained the business model of BNPL in Impulso podcast by Momentum Works last year (E69: The Business Model Behind Buy Now Pay Later). The episode explores:
- The complexities of the BNPL landscape;
- The struggles of BNPL services in the region, from regulations to consumer behavior;
- Key success factors for BNPL to thrive, particularly in Southeast Asia;
- Differences between standalone BNPL apps and integrated platforms;
- Future prospects of BNPL in the region.
Will banks lose out?
Back at the height of the BNPL craze in 2020/1, Momentum Works had just sold our fintech venture to a consumer electronics conglomerate, and we were approached by multiple banks and financial services companies on whether they should launch BNPL.
Our advice was often: it depends. Banks typically have lower cost of capital compared to internet startups, however the latter are better in embedding themselves deeply into online use cases (they often own these use cases – ecommerce platforms for example).
To play to their strength, an easier approach for incumbent banks would be to provide credit for BNPL players such as Shopee PayLater, which many took. System integration is a pain (bank systems are often not designed to process millions of applications every day), but it can be done.
Things become more interesting when some of these internet players become large enough through small loans that they start encroaching into larger ticket, longer duration consumer loans – the exact areas of the banks’ credit card and personal loan businesses.
They have already started: all three groups (Sea, Grab, GoTo) now own or have invested into digital banks, and increased their BNPL’s penetration outside respective platforms.
To understand what they ought to do next, the journey taken by Brazil’s Nubank (NYSE: NU) offers a good reference. (Read our full report on Nubank).
Alas, the good thing is that unlike, banking is not a market where the winner takes all, nor is consumer banking the only business that large banks do.
The dance between tech giants and incumbent banks in the region will not end anytime soon. What we are witnessing through BNPL is only the first chapter of a much broader story: the digitisation of consumer finance in Southeast Asia.
While standalone BNPL startups might struggle, the real opportunity lies in how platforms and banks reconfigure their roles to serve the next hundreds of millions of consumers.
The real competition might have just begun.
The post Klarna IPO vs. Southeast Asia: Did BuyNowPayLater deliver? first appeared on The Low Down - Momentum Works.
