Klarna has announced it has officially filed to list on the New York Stock Exchange, with the IPO widely expected to raise over $1bn.
This is the latest high-profile development in the fintech sector this year, with other milestones including the sale of AI-native fraud prevention platform Ravelin to Worldpay and digital wallet provider Curve raising £37 million in a recent funding round.
This follows another challenging 12 months for the industry, with UK fintech investment falling to $9.9bn in 2024 - a decrease of 27% compared to the previous year.
According to Victor Basta, Managing Partner of investment bank Artis Partners, despite a drop in investment levels, fintech valuations have recovered considerably in recent months. He believes many of the sector’s incumbents have reached a size and prominence in their segments that makes them strategically attractive.
Basta said: “We’re already seeing signs the fintech market is recovering from a dip that has lasted for several years, and a key driver of this change is the maturity of the sector in terms of embedding AI. Large financial technology providers, many of whom rely on decades-old technology, are considering how acquisitions could enhance their tech functionality and enable them to shift their models significantly, for example towards real-time payments or very detailed customer scoring.
“Klarna’s IPO announcement is a prime example. The company’s decision to list has come at the right time for a number of reasons, including the strategic advantages of a raise of over $1bn, the fact that Klarna is currently valued based on revenue and growth rather than earnings, and the opportunity to broaden its range of services beyond BNPL.
“However, perhaps most significantly, Klarna is an attractive prospect because of how deeply it has embedded AI into its processes, successfully maintaining growth at scale while doing so. This functionality is so sophisticated that it’s likely Klarna may eventually be positioned to sell this ‘AI-driven hyper-efficiency’ as a service to other organisations, which would expand its market potential enormously beyond the functional lending business it currently does.
“The sale of Ravelin to Worldpay is another instance of these attributes being recognised and rewarded within the wider fintech space. There is significant evidence of larger legacy players seeking to accelerate their AI capabilities, which will be a key driving force in any M&A uptick that occurs over the course of the next year.”
Basta concluded: “Valuation-driven interest, especially post-pandemic, is at the core of fintech’s rejuvenation. The wealth of growth stage fintech companies, able to offer AI solutions embedded across their processes, are sure to garner attention and trigger a wave of strategic M&A deals.”