(Bloomberg) -- Klarna Bank AB will begin allowing users in the UK to make payments directly from their bank accounts as part of the fintech giant’s efforts to reduce its reliance on Visa Inc. and Mastercard Inc. 

Initially, the move will help Klarna cut costs because bank payments are cheaper than accepting Visa and Mastercard’s products, according to a person familiar with the matter. Longer term, though, the product will help Klarna create a stronger alternative to the payment giants’ networks, the person said, asking not to be identified discussing non-public information. 

Klarna said in a statement it will give consumers who link their bank accounts to its app access to budgeting tools. The fintech will also use the bank data that consumers share to help it make underwriting decisions.

“Open banking offers a huge opportunity for Klarna to reduce the cost of payments to society by cutting out the established card payment networks, and using up-to-date bank account data to make ever better lending decisions,” Wilko Klaassen, Klarna’s head of open banking, said in the emailed statement. 

Klarna’s move is the latest sign that Visa and Mastercard are set to face growing competition in the coming years. Elsewhere, Capital One Financial Corp. is in the process of acquiring Discover Financial Services, which would allow the credit-card giant to, in some cases, cut out Visa and Mastercard and have more control over the prices merchants are charged each time a consumer swipes one of the firm’s cards at checkout.

Klarna Chief Executive Officer Sebastian Siemiatkowski praised that deal when it was announced last month.

Open banking refers to a system where banks share data with other financial firms, providing account information such as client names, balances, payments, transaction history, and other details. The practice enables fintech platforms to provide services to the same customers, generally through mobile phone apps, in a competitive and safe banking ecosystem.

UK regulators pioneered open banking in 2017 to spur competition in financial services. It was sparked by a study showing that the country’s legacy retail banks weren’t pushing hard enough to innovate.

While largely known for its buy now, pay later options, Stockholm-based Klarna is a fully-licensed bank that offers savings accounts, a shopping app and a credit card. It now has 150 million customers and it’s handling almost $200 billion in payments volume every year. 

(Updates with CEO’s earlier comment in sixth paragraph.)

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