Klarna, the Swedish payment giant, has achieved its biggest revenue market in the US, overtaking Germany. In an interview with TechCrunch, CEO and co-founder Sebastian Siemiatkowski expressed his pride in this achievement. Last year, Klarna recorded a 71% increase in gross merchandise value (GMV) in the US compared to 2020. Before diving in, if you’re interested in other international payment topics, checkout that page on micropayments in Chinese. Now, let’s go back to Klarna.
Siemiatkowski credited the company’s success to its buy now, pay later (BNPL) product, which gained traction in the US market in 2018 and 2019. Despite the pandemic, Klarna’s efforts to attract US merchants paid off, with 34 million US users and a network of over 500,000 retailers globally. Klarna now has more than 8 million monthly active app users and 30 million total downloads in the US. Siemiatkowski believes that the company is still in its early phase in the US, with plenty of opportunities to grow by working with merchants and consumers.
Klarna’s app has a feature that allows consumers to shop in installments using Klarna, even with merchants that are not partners with the company, which has given the payments giant an advantage with these merchants. According to CEO Sebastian Siemiatkowski in an interview with TechCrunch, Klarna created a browser that enables users to use Klarna anywhere, even on websites where they are not an existing client merchant. This feature has become very popular, and Klarna now processes over $6 billion in volume through this. Klarna Card, which enables consumers to pay over time in four interest-free payments using a physical card with no down payment, was launched in the US in June 2022, and has garnered a waitlist of 1 million people.
While Klarna is known for its “buy now, pay later” (BNPL) feature, the app has evolved into an “end-to-end shopping destination” with features beyond payments, such as money management tools, delivery tracking, wish lists, digital receipts, and price-drop notifications. Klarna also announced a 37% drop in credit losses in the US, and Siemiatkowski believes this number will continue to decline as the company grows and builds a better risk profile. Despite being often lumped together with US-based BNPL giant Affirm, Siemiatkowski views the two companies as “very different,” with Klarna’s purchases being short-term and installment-based, carrying mostly 0% interest.
Klarna’s primary revenue stream globally is charging retailers a fee to use its services, similar to credit card transaction processing fees. However, the company also provides payment services, reduced financial risk through its interest-free Pay Now and Pay Later options, and marketing support to help retailers connect with customers. Surprisingly, Klarna’s fastest growing revenue stream is its marketing offerings, including ads and sponsored content in the Klarna app, virtual shopping, and shoppable videos. More than 100 of the top US retailers partner with Klarna for marketing to reach new audiences.
Despite its success, 2022 was a challenging year for all BNPL providers, including Klarna, which recorded a pre-tax loss of nearly 6.2 billion Swedish krona for H1 2022 and saw its valuation decline by 85% from $45 billion in July 2021 to $6.7 billion one year later. The company also conducted at least two rounds of layoffs, affecting several hundred employees.