Even financial services businesses want a piece of the ad pie now

And boy, is it moving fast. Just look at the headlines lately: Klarna teaming up with ad tech vendors to push programmatic ads, JP Morgan Chase diving headfirst into the ad game, even PayPal jumping on the bandwagon.

Why now? It’s simple: diving into the lucrative ads business could give banks, fintech giants, and other financial players a competitive edge in the cutthroat arena of financial services. Even so, it’s not for the faint of heart. 

“I think the first year was very much about finding a product market fit and soul searching, seeing what role do we play in the ecosystem because the retail media network is a phenomenon that has risen dramatically in the last three or four years,” said David Sandstrom, chief marketing officer at Klarna.

Since then, the buy-now, pay-later service has expanded its ad arsenal to cover all bases: in-app, CRM, audience extension, programmatic ads, search marketing, affiliate marketing, and even a creator program. All these tools are available to the whopping 550,000 merchants who rely on the platform to reach over 100 million users. 

How this all translates into ad dollars is yet to be revealed — Klarna’s playing coy with the numbers for now. But with a projected 42.8 million users in the U.S. this year alone, that’s nearly a fifth of all digital buyers, according to eMarketer. 

Where Klarna is hoping to make this audience stand out in a crowded market is in its ability to dive deep into what those users are buying, from color preferences to size choices.

“We’re present at the point of purchase, which makes marketing extremely relevant but it also means we have full funnel attribution — something that the bigger platforms like Facebook, Google, don’t necessarily have,” said Sandstrom.

He’s not banking on competing with those platforms for ad dollars anytime soon. But he is confident that Klarna’s ad business can carve out its own space in the market because it’s able to prove that its ads actually drive results. And with the impending demise of third-party cookies in Chrome, throwing measurement into disarray, those claims are poised to shine even brighter.

“If you look at Facebook and Google, what they know is what people click — they do not understand what people purchase, or buy,” said Sandstrom. “What we can do in our attribution model, which will become more important once the cookie disappears, is to make sure that we understand or we can track and attribute something all the way from seeing an ad, to landing on the product detail page to actually completing the purchase. We understand the behavior across the entire journey.”

Them and many others it seems. 

PayPal being the latest one, hiring Mark Grether, the former head of Uber’s ads business, to lead the charge. PayPal hopes that ad network will deliver a clear and concise ROI, something rare outside retail media. With 6.5 billion payments processed by 400 million customers in the first quarter alone, according to its latest earnings, PayPal is betting big on making a splash in the ad world.

“Partnering with retail media networks that have the capability to align consumer interests and potential purchase behaviors is top of mind for many marketers,” said April Weeks, chief investment and media officer at Basis Technologies. “As the industry moves towards signal loss with deprecation of the third-party cookies, finding ways to use first-party data in privacy compliant ways will continue to gain traction as an approach for reaching desired audiences.”

Teaming up with other retail media networks could be a game-changer here. Sure, Klarna and PayPal might target different crowds, but they both thrive on data that boosts sales. This shared focus opens the door for partnerships between the two. Just like how they join forces for customer safety and fraud prevention, it’s not far-fetched to imagine them teaming up in the ad world. Especially as the retail media scene becomes more fragmented and daunting. Marketers want options, but they also crave simplicity. That’s why Meta, Google and Amazon dominate — they offer streamlined solutions in a crowded market.

“Many of these companies have specifically scoped data: Uber has real-world retail location data, and Instacart has grocery shopping data, for instance,” said Eric Seufert, independent analyst and investor. “That data is useful in helping specific sets of advertisers target ads where their products are contextually relevant. But financial institutions have visibility into the entire commercial lives of their customers, so they can serve a wider set of advertising clients.”

Financial firms may hit some rough waters ahead. The data they’re aiming to cash in on is sensitive, raising worries about potential misuse for microtargeting, discrimination, scams, fraud and privacy breaches. As these FMNs expand, there’ll be chatter about beefing up regulations to safeguard against these risks.

Jonathan Joseph, head of solutions at data permissioning company Ketch, delved into the challenges these companies are up against. Banking with JP Morgan Chase himself, Joseph is intimately familiar with how they handle data in his role. So, when his own bank began flooding him with real-time updates of his credit score, he felt a bit on edge. “I don’t know if I want that,” he admitted. While he understands the reasoning behind it, he wasn’t too keen on not having a say in the matter. And chances are, the bank’s intentions to allow marketers to target customers based on their spending history will raise similar concerns for others.

The rise of financial firms doubling as ad sellers is becoming a major subplot in the retail media story. It’s quickly becoming one of the hottest segments in the ad market, with corporate bigwigs fully embracing the idea that “everything is an ad network.” And it doesn’t seem like this trend is going to hit the brakes anytime soon.

Global retail media spend is expected to hit $140 billion this year, according to eMarketer forecasts. That’s a 21.8% increase on the year before ($115 billion), and a 20.3% share of total digital ad spend. And those figures are set to increase again next year by another 21.6% to $165.9 billion, taking up 18.5% of total digital ad spend in 2025, per eMarketer.