Klarna launches rival direct debit payment method in Germany

Klarna has struck a deal to allow its customers to make recurring payments by a new payment method heralded as the latest iteration of open banking, which is looking to compete with direct debit payments.

The Swedish financial company is partnering with Sparkassen, Germany’s largest banking group, to launch Variable Recurring Payments, also known as VRPs, in Germany.

VRPs have long been touted as open banking’s hot new initiative to rival direct debit payments.

The deal with Sparkassen means that Klarna customers with an external Sparkassen bank account can set up an authorisation for Klarna to take recurring payments from their account, without needing to specify the value of the payment up front.

Recurring payments for varying amounts can be made, without the customer needing to sign off each one. VRPs are expected to be used to pay for utility bills, subscriptions and other regular payments in a more flexible way. The move comes as Klarna looks to take market share from card giants Visa and MasterCard.

Advocates of VRPs say its advantages over direct debit payments are that regular payments can be customised and are quicker and safer, with payments appearing immediately in accounts.

Nicole Defren, head of northern and central Europe at Klarna, said: “VRP sets a new benchmark for digital payments for millions of consumers.

"With Variable Recurring Payments, Klarna offers a modern, account-based alternative to traditional direct debits — secure, fast, convenient, and fully transparent. Together with the Sparkassen Finanzgruppe, Klarna continues to expand an innovative and future-ready payments network.”