The news: Klarna partnered with Nift, a gift platform, to offer “gift”-style rewards for customers’ BNPL purchases.

Nifty gifts: Nift rewards Klarna customers with tailored gift cards that users can redeem at merchants like Chewy, Fabletics, HelloFresh, Laura Geller, NatureMade, Quince, and SiriusXM.

Nift claims that 88% of gift recipients rate their gifts positively and that 72% like the company that gave them a gift more after receiving the reward, which could help Klarna secure longer-term loyalty among its customers.

Return to rewards: Klarna and other BNPL players have struggled to incorporate rewards into their customers’ experiences—they are the most requested to improve BNPL customer satisfaction, according to a PYMTS-AWS survey. 

• Affirm and Afterpay cut their rewards program last year after struggling to harness the revenue streams to finance these costly programs.
• Other BNPL firms pivoted to subscription models to boost profitability and finance their rewards programs or simulate a credit card experience for consumers—and user adoption was tepid at best.

The crux of the issue: BNPL is a low margin business. The CFBP reported that BNPL players’ profit margins were just 1.01% in 2021.

Competing with credit cards: The inability to find a winning formula for rewards is a barrier to growth. 

Consumers electing to use BNPL over credit cards sacrifice sizable cash-back opportunities and travel points. It’s one reason why BNPL remains more popular among consumers with lower incomes and credit scores—who might not qualify for the most rewards-rich credit cards in the first place.

Our take: While making inroads with Nift is a good step forward, Klarna still faces the issue of only offering trinkets for purchases instead of material rewards: cash and travel. There’s also less direct incentive for spending—unlike cash back and points, there’s no clear (or cumulative) dollar-to-rewards ratio.