Close Brothers is selling its point-of-sale (POS) retail finance business to Swedish consumer lender Klarna, as it decides to focus on secured lending products, which include leasing and motor finance.
Close Brothers Retail Finance (CBRF), which offers unsecured loans through retailers such as Samsung Electronics, Mothercare, Jessops and Cotswold Outdoors. It had a loan book of £66m as of July, according to Close Brothers.
Close Brothers said in a statement: “The group has concluded that the business does not provide a long-term fit with our predominantly secured business model.”
Since its foundation in 2005, Sweden’s Klarna has been focused on expanding across Europe and the UK by bundling financing and merchant services like payments processing. It has partnered with both high street and online retailers, including Moss Bros, Etsy and now-defunct Maplin.
The bank holds a licence from Swedish watchdog SFSA, and complies with a number of Financial Conduct Authority (FCA) rules under the EU’s passporting regime, according to Klarna’s and the FCA’s websites.
Earlier this month, the lender caught the British watchdog’s attention earlier when one of its vendor partners, online mattress retailer Casper, was found broking finance without an appropriate licence, as first reported by the Financial Times. Klarna maintains it had informed Casper of the regulatory requirements, and has since suspended the partnership.
The CBRF acquisition will need to be approved by Sweden’s SFSA, which the two banks expect to happen by the end of this year. A spokesperson for Klarna confirmed to Motor Finance it is currently focused on POS finance and has no plans to enter the UK’s direct personal loans market.
Michael Rouse, chief commercial officer at Klarna, said: “What CBRF have achieved to date in the UK is impressive but together we can invest in realising the full potential of the business. Outside of the core offering in retail finance, we immediately recognised a shared commitment in building deep partnerships with our merchants.”
Alex Marsh, managing director at CBRF, added: “We at CBRF have transformed retail finance in the UK over the past four years and are extremely proud of what we have accomplished.
“We are now focusing on a smooth integration and seamless continuity of our offering to merchants and customers.”