Swedish buy now, pay later outfit Klarna has raised $650 million in an equity funding round, at a post money valuation of $10.65 billion, ranking the firm as the highest valued private fintech in Europe, and the fourth highest worldwide.
The funding round is led by Silver Lake, alongside GIC - Singapore’s sovereign wealth fund - as well as funds and accounts managed by BlackRock and HMI Capital.
Concurrently, Merian Chrysalis, TCV, Northzone and Bonnier have acquired shares from existing shareholders. They will join current investors such as Sequoia Capital, Dragoneer, Permira, Commonwealth Bank of Australia, Bestseller Group and Ant Group in supporting Klarna’s future growth.
Klarna’s direct to consumer app has more than 12 million monthly active users worldwide, with 55,000 daily downloads.
Earlier this year, Klarna acquired Italian BNPL firm Moneymour and launched a savings account for German consumers using online deposit marketplace Raisin.
However, the firm has been burning cash in its attempts to break out of its home market, with US expansion plans proving a particular drain. The firm reported a $93 million loss in 2019 (from a $10 million profit the year before) as the scale of its ambitions hit the bottom line.
The new cash will go to a renewed effort to break into the United States, where the company now claims more than 9 million consumers.
After adding more than 35,000 new retailers during the first half of 2020, Klarna says it has become the pay later partner of choice for the top 100 highest grossing merchants in the US.
As a result, business appears to be a on a rebound, with volume and revenue for the first half of 2020 growing 44% and 36% year-on-year to more than $22 billion and $466 million respectively.
Sebastian Siemiatkowski, co-founder and CEO of Klarna, says: “We are at a true inflection point in both retail and finance. The shift to online retail is now truly supercharged and there is a very tangible change in the behaviour of consumers who are now actively seeking services which offer convenience, flexibility and control in how they pay and an overall superior shopping experience. Klarna’s unique proposition, consumer preference and global retailer network will prove an excellent platform for further growth."
However, the advent of the buy now, pay later economy is raising concerns about the mounting debt being incurred by users. In the UK, the Advertising Standards Authority has launched a probe into the promotional activity of Klarna amid fears that it is encouraging reckless spending by young people.
Similar concerns are evident in Klarna's home market of Sweden, where regulators are acting to discourage online shoppers from paying with credit. Under the new Swedish Payment Services Act, merchants offering a list of payment options must now present the payment methods that do not put the consumer into debt, such as the bank-backed Swish payment app, first on the list.