The Swedish “buy now, pay later” pioneer said on Tuesday that its new design will help consumers find the items they want using more advanced AI recommendation algorithms, while merchants will be able to target customers more effectively.

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Klarna announced on Wednesday a global partnership with Uber to power payments for the ride-hailing giant’s Uber and Uber Eats apps.

The partnership will see the Swedish fintech firm added as a payment option in the US, Germany and Sweden, Klarna said in a statement.

In these countries, Klarna will introduce its Pay Now option in both apps, which allows customers to pay for an order instantly with one click. Users will be able to track all their Uber purchases in the Klarna app.

The company will also offer an additional payment option for Uber users in Sweden and Germany, allowing users to bundle purchases into a one-time interest-free payment that is deducted from their monthly salary.

Interestingly, the company does not roll out payout-based buy-now-pay-later plans, arguably Uber’s most popular service, on its platforms.

Sebastian Semyatkowski, Klarna’s CEO and co-founder, said in a statement on Wednesday that the deal represented a “significant milestone” for the company.

“Consumers can now pay quickly and securely in full, which already accounts for over a third of Klarna’s global volumes, and more easily manage their finances in one place,” Semyatkovski said.

Klarna declined to disclose the financial terms of its deal with Uber.

Big profit per trader before IPO

The Uber deal marks one of Klarna’s most significant commercial gains in recent memory and comes as the European fintech giant is rumored to be gearing up for a blockbuster initial public offering that could value the firm at just north of $20 billion.

Klarna has begun detailed discussions with investment banks to work on an IPO, which could happen as early as the third quarter, Bloomberg News reported in February, citing unnamed sources familiar with the matter.

CNBC could not independently verify the accuracy of the report. Klarna said it does not comment on market speculation.

Such a trade in the market would mark a turnaround for a company that saw $38.9 billion wiped from its 2022 valuation when worsening macroeconomic conditions, fueled by Russia’s incursion into Ukraine, caused sky-high tech valuations to reset.

Klarna reached an impressive $45.6 billion in a 2021 funding round led by SoftBank, before its market value fell to $6.7 billion the following year in a so-called “down.”

Buy now pay later boom

Klarna is one of many “buy now, pay later” services that allow users to pay off their purchases over a period of monthly installments.

The payment method is becoming increasingly popular among consumers who shop online and in-store. It can also be an alternative to credit cards that charge interest and high fees.

However, it has also raised concerns about the affordability of such services and whether it actually encourages some consumers – especially younger people – to spend more than they can afford.

In the UK, the government has proposed draft laws to regulate the buy-now, pay-later industry.

The U.S. Consumer Financial Protection Bureau previously said it plans to subject buy-now, pay-later lenders to the same oversight as credit card companies.

Meanwhile, the European Union last year adopted a revised version of its Consumer Credit Directive to include buy-now-pay-later services within the scope of the rules.

For its part, Klarna has defended the “buy now, pay later” model, saying it offers customers a cheaper way to access credit than traditional credit cards and consumer loans.

The company also said it welcomed regulation of buy-now, pay-later products.