Swedish payments giant, sometimes bank and stablecoin issuer Klarna is learning that it’s a lot harder being a listed fintech firm than a unicorn whose eye-popping valuation is decided by private investors who cannot resist hitting the inflate button.
The aura of invincibility enjoyed by erstwhile unicorns like Klarna dissipates pretty quickly after an IPO “pops” and reality sets in. Investors in public markets are not necessarily more rational than their private market counterparts. They are less forgiving, though.
The Swedish company’s fourth quarter performance wasn’t half bad. In some respects, it was pretty good. The company posted US$1 billion in revenue for the first time, driven by rapid U.S. expansion and increased adoption of its banking products. Revenue in the U.S. expanded 38% annually. Users of Klarna’s banking services (card, financing, savings) doubled to 15.8 million.
Unfortunately, the Swedish payments giant still lost US$47 million in the fourth quarter, equivalent to a 12-cent loss per share. The net loss was driven by high upfront provisions for credit losses, which are booked immediately, while revenue from these loans is recognized over time. For 2025 overall, Klarna lost US$241 million.
Klarna’s share price just keeps on falling, suggesting that investors don’t like what they see. It’s lost 71% of its value since the Sept. 2025 IPO and 26% over the past month.
We are heartened to see that investors aren’t giving the Swedish firm a free pass and that they are not moved by its AI cheerleading. In a news release, Klarna emphasized that headcount has declined 49% since 2022, “proving that with the right technology and the right talent, you can do more with less.”
It remains to be seen how smart a move it was for the Swedish company to cut half of its staff.
What about the company’s fundamentals? After all, it is not unusual for a high-flying fintech startup to encounter a steep learning curve after it becomes a public company.
Auguring well for Klarna is the fact that it has achieved serious scale. As of Q4 2025, it serves 118 million active consumers and nearly 1 million merchants across 26 countries.
Realizing the limitations of buy now, pay later (BNPL), Klarna is pivoting to banking to make its operations more profitable. However, in the U.S., which is crucial to the company’s overall growth strategy, it lacks a banking charter. Klarna currently partners with Utah-chartered WebBank to offer credit, and it partners with Marqeta to support its U.S. debit card, allowing for FDIC-insured deposits.
But is the partner bank route the way forward? We aren’t so sure about that.
Lacking a banking charter in the U.S. restricts Klarna’s growth by forcing it to rely on partner banks for regulatory compliance and funding, which increases costs, limits product offerings, and creates operational friction compared to licensed banks. While Klarna is a licensed bank in the European Union, its reliance on Utah-based WebBank to issue products in the U.S. limits its ability to directly hold deposits and compete on traditional banking.
Crucially, without a bank charter to directly accept low-cost consumer deposits, Klarna is forced to fund its lending book (BNPL) through more expensive alternative debt facilities, warehouse lines, or equity.
At the same time, without its own charter, Klarna cannot directly manage relationships with regulators. Without those relationships, Klarna will find it harder to navigate complex American banking regulations and gain approval for new, innovative financial products.
There is also a branding problem that goes along with lacking a banking charter. State laws in the U.S. restrict companies without a charter from marketing themselves as a “bank.” If Klarna continues on its current path, its ability to build customer trust might be reduced.
We will be interested to see how Revolut’s plans to acquire a U.S. banking charter go. If the UK fintech giant succeeds in that endeavor, it may force Klarna to reconsider its strategy.