Swedish banking company Klarna, Europe’s joint-largest unlisted fintech, suffered its first-ever annual loss in 2019, making heavy credit falls amid a big push into the US ahead of a possible stock market flotation.
The “buy now and pay later” company made a net loss of SKr902m ($93m) last year, down from a profit of SKr105m a year earlier, marking its first annual deficit since it was founded in Stockholm in 2005.
Its credit losses more than doubled to SKr1.86bn, something it blamed on entering new markets where first-time customers pay back less reliably.
Backers such as venture capital firm Sequoia Capital, private equity group Permira, and fashion retailer Hennes & Mauritz have invested in Klarna, pushing its valuation last August to $5.5bn, the same amount posted this week by UK-based digital bank Revolut.
Klarna, which also counts rapper Snoop Dogg and Visa among its shareholders, had been unusual among fintechs in having consistently been profitable due to its model of earning fees from merchants such as Ikea and Asos as well as interest from late-paying customers.
But it has ended that record as it invests heavily to boost its position in the US — the most likely venue for any stock market flotation — as well as in Australia and New Zealand. It is also readying to launch in several, unnamed European countries and has opened a tech hub in Berlin.
Sebastian Siemiatkowski, Klarna’s chief executive, told the FT six months ago that “I definitely think [an IPO] will happen” but added that the current focus was on “growing fast” and has remained tight-lipped on any timetable.
Its total operating revenues jumped by almost one-third to SKr7.2bn ($740m) as the volume of goods sold through Klarna in 2019 rose by 32 per cent to more than $35bn.
Klarna handles payments for more than 200,000 merchants around the world, and in 2019 added brands such as H&M, Expedia, Superdry and Samsung to its roster.
It increased the number of US users of its pay-later services sixfold during 2019 while those in the UK doubled.
The Swedish group added: “The ongoing investment phase has and will further enhance the offering towards both merchants and consumers across markets, which provides a platform for driving sustained customer preference and growth in the next years.”
Klarna has faced growing scrutiny in Sweden over whether its offers to let customers pay in 14 or 30 days, with steep fees if they forget, trap vulnerable consumers. The company said it was aiming to reduce its revenues from late fees and did not charge interest or fees in the US or UK on “core products”.
Started in Stockholm in 2005 by three business school friends, Klarna took the old-fashioned way of paying only after receiving an invoice and applied it to online shopping. It became one of the first large European fintechs to receive a banking licence, in 2017, and offers its own payment card in Sweden and Germany, one of its biggest markets.