"At this point of time, everything is about momentum, you may describe it almost like a land grab currently," Klarna CEO Sebastian Siemiatkowski told Yahoo Finance Live (video above), later adding: "I think that there will be one or two more years of that before the market stabilizes slightly, and so we're very excited about seeing how that's going to play out."
Square was launched by Twitter (TWTR) Co-Founder Jack Dorsey, who is CEO of both companies. Afterpay and Klarna, a Swedish firm previously valued at $46 billion, have led the way for companies enticing consumers to move away from credit cards to debit transactions, allowing users to defer payments interest-free, and skipping credit checks. (Merchants are charged a small fee for the service.)
"It's very exciting to see this shift away from credit cards to debit cards and buy now pay later," Siemiatkowski said. "That was one of the things that Square pointed to, [which] was focusing on younger customers or consumers who might not trust credit card companies as much."
A December 2020 securities filing by Visa (V) indicated a shift away from credit to debit: When comparing the period of October 1 to November 30, 2020 to the same time in 2019, the company noted a big surge in the usage of debit by 21%, as compared to a decline in credit usage by 4%.
Siemiatkowski noted that the U.S. side of Klarna's BNPL business has been growing quickly in the U.S. and is now nearing 20 million users. North America became Afterpay's largest market in April, with more than 9 million active users in the region.
"People are dead tired of the banking industry and all their hidden fees and all their dirty tricks," Siemiatkowski said. "And this is a better way of offering these services to consumers. So I think this is the beginning of a very major, major shift in this space."
Aside from Afterpay and Klarna, U.S.-based Affirm (AFRM) is also a player in the BNPL space and made its public debut in January 2021.
Aarthi is a senior reporter for Yahoo Finance. Follow her on Twitter @aarthiswami.