Tag: klarna

  • Klarna fights an uphill battle with investors

    Klarna fights an uphill battle with investors

    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.

  • Klarna hops on the stablecoin bandwagon 

    Klarna hops on the stablecoin bandwagon 

    If there was any doubt that the world is in the midst of a stablecoin craze – we hesitate to use that loaded term “bubble” – it should be dispelled by the recent launch of a stablecoin by buy now, pay later (BNPL) behemoth Klarna. 

    In a news release, Klarna explains its rationale for the issuance of KlarnaUSD, which is currently in a testing phase and will be available to the public on mainnet in 2026 – likely the middle of the year. Citing consultancy McKinsey, the Swedish fintech giant says that stablecoin transactions now exceed US$27 trillion a year and could overtake legacy payment networks before the end of the decade. 

    “With 114 million customers and $118 billion in annual GMV, Klarna has the scale to change payments globally: with Klarna’s scale and Tempo’s infrastructure, we can challenge old networks and make payments faster and cheaper for everyone,” Sebastian Siemiatkowski, co-founder and CEO of Klarna, said in the news release. Klarna is the first company to launch a stablecoin on Tempo, a new independent blockchain started by Stripe and Paradigm that’s purpose-built for payments. 

    We aren’t holding our breath for stablecoins to relegate legacy payment networks to the dustbin of history, but we can see why Klarna’s leadership is latching onto stablecoins at this moment. With its core BNPL product facing intensifying competition, Klarna needs new engines for growth now that it is a public company that has to stand up to widespread investor scrutiny. 

    After several years of delays, the Swedish company finally went public on the New York Stock Exchange (NYSE) in September at a valuation of US$15.1 billion, which is about 1/3 of what it was worth in private markets back in 2021. Although the IPO itself was considered successful, the company’s share price has dropped 33% since September as investors worry about Klarna’s ability to generate sustained profits. 

    While Klarna’s third-quarter revenue reached a record US$903 million, its net loss widened to $95 million. Klarna says that it posted a loss mainly due to a US$235 million provision for credit losses, an accounting requirement tied to the rapid growth of its expanding Fair Financing product.

    The U.S. is a key growth area for Klarna, but its credit loss rates are higher there than in its core European markets. This is partly because Klarna must compete more directly with traditional credit cards in the U.S., where its primary users tend to be consumers who need more time to pay.

    Launching a stablecoin does not fundamentally address the issues with Klarna’s current business model, but it could reduce the US$32.7 billion in cross-border fees the company pays, lowering its costs and allowing it to make faster payouts to merchants. 

    But will this be a gamechanger? 

    Maybe not. 

    Indeed, we are skeptical that stablecoins traveling on blockchain-based payment rails – Tempo’s or anyone else’s – are going to pose a serious challenge to the interbank messaging network SWIFT, which has significantly improved the speed of transactions in recent years. Currently, 75% of payments travelling over the SWIFT network reach beneficiary banks within just 10 minutes. The interbank messaging network does acknowledge that “more work is needed at the final stage of a payment’s journey—the last mile—to address friction that delays funds from being delivered to end beneficiaries.” 

    At the same time, stablecoins lack a single, globally accepted regulatory framework. Rules vary significantly by country, creating complexity and uncertainty for large institutions operating across multiple jurisdictions. SWIFT, on the other hand, operates within mature and well-understood legal frameworks.

    Sweden’s central bank notes that the use of stablecoins outside decentralized finance, for example for buying and selling of crypto-assets and use as collateral, is still limited but is growing rapidly in some areas. Whether this development will lead to wider use remains uncertain.

    Time will tell if Klarna’s stablecoin bet pays off. 

  • Revolut’s Nordic expansion is about more than challenging Klarna

    Revolut’s Nordic expansion is about more than challenging Klarna

    UK fintech giant Revolut, riding high on a new and improved valuation of US$75 billion, is set to challenge buy now, pay later (BNPL) juggernaut Klarna on the Swedish company’s home turf—and immediate environs. Revolut announced on November 6 that it would open a branch in Stockholm in 2026. The Swedish capital is home to the headquarters of Klarna.

    While Klarna’s largest market by revenue is the United States, its footprint runs deep and wide in the Nordics. About 82% of Swedes use Klarna. On the merchant side, a Dec. 2024 study by e-commerce market intelligence firm ECDB found that about half (47.2%) of Swedish online stores offer Klarna Invoice, while about 39.2% do so in Norway. These are the highest merchant adoption rates among e-commerce merchants in any market where Klarna operates.

    Yet Revolut’s interest in Sweden and the Nordic countries is not just about throwing down the gauntlet to Klarna. The UK fintech has long had a presence in the Nordics, where it already has 2 million customers, half of whom are in Sweden, and intends to increase that number to 3 million by the end of 2026. Chief Growth Officer Antoine Le Nel has emphasized that Revolut is, as usual, thinking very big: It wants to take on incumbent Nordic banks that control most consumer deposits, not just Klarna.

    Revolut’s new Stockholm branch will operate under the UK firm’s European banking license from Lithuania, allowing it to function as a local bank. That means Swedish customers could soon receive salary payments and local transfers entirely through Revolut. The company is also preparing a local product push consisting of daily-interest savings accounts in Nordic currencies, commission-free ETF investing and Apple’s tap-to-pay feature for small businesses.

    It all sounds promising—except that UK regulators have some concerns that Revolut may be biting off more than it can chew—though they issued the company a provisional banking license in 2024. In mid-October, The Financial Times reported that regulators are unsure that Revolut can implement risk controls able to keep pace with its relentless international expansion.

    Nik Storonsky, Revolut’s CEO and co-founder, said in September that his top priority was to get a UK banking license, to transfer customers into the new bank, and to offer them credit products. He and other Revolut executives hope to obtain the final license this year, but that seems unlikely with less than two months to go in 2025.

    Having managed to grow its valuation from US$45 billion in August 2024 to an eye-popping US$75 billion in just over a year, Revolut is betting that it can have its cake and eat it too: continue its brisk international expansion – it also set up shop in Colombia in October – and before long, receive a full banking license in the UK that will allow it to go head-to-head with large incumbent lenders. Driving Revolut’s confidence are growth across its business lines and in profitability. In 2024, Revolut’s profits jumped 150% to US$1.4 billion, while revenue rose 75% annually to $4 billion. Cryptocurrency, wealth management and subscriptions are now all key growth engines for Revolut.

    In 2026, Revolut will look to follow in Klarna’s footsteps and carry out a successful IPO. The Swedish firm listed on the New York Stock Exchange (NYSE) in September, raising US$1.37 billion at a valuation of $15.1 billion.

    Ironically, following the successful IPO, Klarna chairman Michael Moritz reportedly told employees: “We are 10 years behind Revolut.” While Moritz did not elaborate, we can make an educated guess that he was referring to Revolut’s successful diversification from payments into full-service banking, insurance, investing, and digital assets. In contrast, Klarna remains heavily dependent on payments and especially BNPL. It is that strong, diversified product portfolio and Revolut’s indefatigable persistence that could eventually pose a significant challenge to Klarna in its home market of Sweden and the broader Nordic region.