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March 2, 2021updated 19 Mar 2021 10:06am

Someone will pay for this later: Klarna goes tridecacorn in $1bn round

By Eric Johansson

Buy-now-pay-later provider Klarna has reclaimed the top spot as Europe’s highest valued fintech after completing a $1bn funding round that saw its valuation climb past the $31bn mark.

The Swedish firm goes from decacorn to tridecacorn status following its previous $650m funding round in September 2020 which took its valuation close to $11bn. Klarna briefly lost its highest-European-valuation bragging rights in January 2021 when UK-based Checkout.com was valued at $15bn after closing a $450m injection.

Klarna says that its new round is backed by new and existing investors. Over the years, Klarna funding has come from Atomico, Visa, Dragoneer, the Commonwealth Bank of Australia, Northzone, Brightfolk A/S, Permita, AB Orestund and Sequoia Capital.

“At Klarna, we solve problems – that is the heart of what we do for both consumers and retailers,” Sebastian Siemiatkowski, co-founder and CEO of Klarna, said in a statement. “Consumers want transparent products to help them bank, shop and pay that reflect the way they live their lives, not just outdated traditional models. Each and every one of us at Klarna will continue to work hard on this, but it is also time for us, with our culture of change, disruption and innovation, to focus on tackling bigger, more complex issues.”

Speaking with the Financial Times, Siemiatkowski revealed that the company is planning to use its new financial muscles to acquire other startups.

“There are some great startups out there that don’t have the distribution power, the 90 million users that Klarna does,” he said. “We do believe this is going to be a transformative time for retail banking and payments, and we want to serve our customers with as much value as we can so if we see such opportunities it could be very interesting.”

Siemiatkowski has previously hinted that the company is planning to go public in the next “one or two years”. He hasn’t offered much detail on this but has stated that the company is considering a direct listing like fellow Swedish startup Spotify.

This would enable it to avoid an initial public offering, which Siemiatkowski has said tends to deliver value to investment banks rather than the company.

Klarna is part of the emerging Nordic fintech sector, known for companies such as neobank Lunar, open banking startup Tink and payments unicorn Trustly.

Richard Rosenholtz, chairman of the Nordic RegTech Association, told Verdict he is confident that Klarna’s new valuation will only accelerate the growth of the region’s emerging fintech ecosystem.

“I’m positive that the success of unicorns from Scandinavia, the attention they bring to the overall community of tech startups and scaleups here, and the waves that makes will help others with funding and talent,” Rosenholtz said.

“Klarna, now being a truly global player, is still [headquartered] in Stockholm and thereby attracting talents to the region, talent that may not stay forever but rather do their own startup in Stockholm, bringing with them the knowledge and network to attract even more talent and investment.”

Klarna does, however, face a number of challenges including increased competition and regulations.

Having expanded to the US and Australia over the past few years, Klarna is now directly competing with BNPL rivals on a global scale. This situation has sometimes turned particularly sour.

For instance, Klarna and Afterpay recently had very public spat where Siemiatkowski accused the competitor of forcing retailers to pay “extortionate” fees to use the company’s services, according to the Australian Financial Review.

Afterpay’s CEO Anthony Eisen fired back by calling the claims “disingenuous and desperate”, Stockhead reported.

Other competitors include US-based rival Affirm, which went public in January and saw its shares soar by 98% on the first day. It is currently trading at around $91 per share.

Klarna is also being challenged by new BNPL startups that have raised funds in recent years. That list includes new ventures such as Zilch, Splitit and tabby.

Other companies, such as PayPal, have also recently began to offer instalment services for payments.

The BNPL market at large is also facing increasing regulatory burdens. For example, in the UK the Financial Conduct Authority (FCA) has recommended stricter regulations to minimise the risk of customers living beyond their means as a consequence of using BNPL services.

The proposed new laws would require lenders such as Klarna to carry out affordability checks and “ensure the vulnerable are treated fairly”.

Alex Marsh, head of Klarna UK, told Verdict at the time that the company welcomed the FCA’s proposals.

“We agree that regulation has not kept pace with new products and changes in consumer behaviour and it is now essential that regulation is modern, proportionate and fit for purpose, reflecting both the digital nature of transactions and evolving consumer preferences,” Marsh said.


Read more: Klarna welcomes UK buy-now-pay-later regulations