Dive Brief:

• Etsy will now allow U.S. shoppers to pay for purchases in installments using Klarna, the company announced on Tuesday. 

• For orders between $50 and $250, the payments will be in four interest-free installments. Orders between $250.01 and $10,000 are eligible for financing from Klarna on a schedule offered by the platform, Etsy said.

• Etsy noted that sellers receive funds upfront when customers pay with Klarna. The service will be available to U.S. consumers this holiday season and other markets in 2021, per the company announcement.

Dive Insight:

Etsy positioned the partnership with Klarna as an opportunity for consumers to support small businesses without having to pay for their purchases in full upfront. "We know flexibility is important to millions of our users, and Klarna is yet another way shoppers can support small businesses on Etsy with ease and confidence, on a payment schedule that suits their needs," the announcement stated. 

Though retailers overall have faced challenges during the COVID-19 pandemic, Etsy is among other platforms that have seen exponential growth during the ongoing crisis. Its second-quarter revenue jumped by 136.7% to $428.7 million.  The company saw 11.5 million new and 7.2 million reactivated buyers, meaning consumers who hadn't purchased through the platform in a year or longer.

Meanwhile, Klarna has been partnering over the last year or so with brands and retailers like Toms, Asos and Macy's, the latter of which recently invested in the payments platform. This past summer, the platform reached almost 8 million users, offered its installment plans in stores via Google Pay and debuted a loyalty incentive program.

But as Klarna amasses retail and brand partnerships with Etsy, Macy's and other companies, so are its competitors. In late August, David's Bridal teamed up with Affirm for installment payments. Afterpay, which is now available at select retailers for in-store purchasing via Apple Pay or Google Pay, has worked with DSW, Forever21 and Finish Line.