Thanks to the boom in e-commerce in recent years, deferred payment has become the payment method of choice for many online shoppers. And with good reason: with fractional payment, the customer benefits from a cash advance to make an expensive purchase, the payment of which will be spread over several days or months. The merchant, for his part, pays an intermediary who assumes the risk of non-payment, i.e., it is the intermediary who recovers payment from the consumer, in return for commission.
This mode of payment seems far more advantageous than consumer credit, which can have exorbitant interest rates, making the final bill quite heavy for the buyer. FinTech Klarna, having understood much earlier that online payment needed to be made simple and secure, seized the opportunity to offer both buyers and merchants this payment method. Today, this FinTech has become one of the giants in the field. But what can we learn from the success of this Swedish company?
History of Swedish FinTech
Klarna was founded in Stockholm, Sweden. was founded in 2005 by Sebastian Siemiatkowski, Victor Jacobsson and Niklas Adalberth. Over the past 17 years, this financial technology company has made it its mission to make online payments as secure, simple and transparent as possible. As part of its expansion, in 2014, the company acquired SOFORT, giving birth to the Klarna Group. Investors such as Atomico, Sequoi Capital, Bestseller, Permira and Visa continue to support Klarna.
Klarna: an idea the founders believed in
In its early days, Klarna didn't exactly have the support of the tenors of the time. In an interview with Forbes, Klarna CEO Siemiatkowski made this point. He recalled that during an innovators' pitch, they were encouraged to abandon the project, because "it wasn't great".
Despite the criticism, the founders didn't give up on their idea, since in any case, at the time, the banks couldn't understand the scope of such a project. And so, on April 10 April 2005, the Klarna platform facilitated its first transactionwhich took place in a Swedish bookshop: Pocketklubben.
Klarna: Europe's most valuable start-up in 2021
In 2020, with the rise of e-commerce, particularly against the backdrop of the COVID-19 pandemic, the Swedish online bank saw its growth skyrocket. The volume of purchases exceeded $50 billion against losses of around $150 million. The latter were due to investments made in the United States, as well as to the increased credit losses the company suffers when a buyer fails to make all his payments.
The year 2021 saw the company achieve a feat never before seen in Europe for a fintech. Klarna officially raised over one billion dollars in funds, making it the best-valued unlisted company in the history of European tech. The group was then valued at $45.6 billion.
Klarna: what's it for?
Klarna allows buyers to pay for their online purchases in 3 or 4 instalments, free of charge from its partner retailers. Credit is available for up to 36 months, but this time with an interest rate for larger purchases.
The service also allows customers to defer paymentthe aim being to try on an item and return it without being charged. All these different options available online enable buyers to spread their spending and, above all, to reduce the impact of inflation on their purchasing power. Klarna, in turn, earns its income through commissions it charges sellers on each purchase.
Klarna: what's in it for everyone?
Klarna's services and app make it easy to shop online and return items after a home fitting. Consumers also have better control over their budgets, which means they can to avoid excessive debt.
A loyalty program has been set up by Klarna to enable users to earn rewards when they make a purchase. The brand whose product they buy can also offer rewards through the platform.
The merchant, for his part, sees his sales flourish, as Klarna's solution reduces cart abandonment rates. It should also be emphasized that split payments have no impact on the merchant's cash flow. Klarna acts as an intermediary between buyer and seller. At the time of the transaction, Klarna pays the merchant the full amount, and then recovers it from the customer.
Klarna mobile application
The Klarna application offers consumers a wide range of functions. These include the creation of a virtual bank card, delivery tracking and price alerts, access to good deals and purchase history, etc. It also features a wish list, enabling customers to share items they'd like to buy with friends and family.
Will Klarna go public?
More than a year ago, Klarna floated the idea of going public, but at present the date, place and price of such an operation have not yet been set. not yet fixed. The company does, however, specify that it is ruling out any idea of a SPAC (Special Purpose Acquisition Company) in favor of an IPO.
Although the company has the option of going public anywhere, it's not out of the question to choose the London Stock Exchange. Such an operation would mean that Klarna would want to follow the same path as other fintech giants such as Wise, PensionBee and Funding Circle.
Does Klarna have a bright future ahead of her?
The Swedish fintech is now present in 45 countries, including the United States, Belgium, the United Kingdom, Australia, Canada, Spain, Italy and France. From 90 million users in 2021, it has grown to nearly 150 million today.
Every day, the number of transactions is close to 2 million. Well-known brands such as Ikea, Nike, H&M, Adidas, Sephora, Samsung and Body & Fit are among the platform's nearly 450,000 merchant partners. It's worth noting that the fractional and deferred payment market is booming, which suggests a certain growth potential.
However, in August 2022, Klarna's CEO pointed out that the market was going through quite a rough patch due to inflation, the Russian-Ukrainian crisis, investor pressure and so on. At present, the company is facing a colossal 85% drop in its valuation. Whereas in 2021, it was expected to exceed $40 billion, in 2022, it will be just $6.5 billion.. In May, the company decided to let go 700 members of its workforce, i.e. around 10%.
Although Group revenues rose by 24%, losses quadrupled. A possible recession is therefore to be feared. For the time being, management will have to implement a real economic recovery plan. The company is forecasting profitability on a monthly basis as early as the second half of 2023, as well as an improvement in operating income.
Klarna: key information
The workforce
Klarna has 150 million customers through 450,000 merchants in 45 countries. Its number of employees is 5,000.
Sales figures
From January to the end of June 2022, the Klarna Group generated sales of of SEK 9.1 billionor $950 million. This represents an increase of 24% on the previous year.
Initial public offering
In an interview in May 2022, Managing Director Sebastian Siemiatkowski stated that no IPO was planned.
Business and strategic objectives
Decacorne's main objective is to become an online shopping portal. She is committed to bringing about a positive transformation within her company, to the e-commerce sector as well as to the financial sector. She wants to make online shopping as simple as possible and offer a better alternative to the traditional credit card. Klarna is also constantly developing tools to enable its users to take control of their finances.
Another important objective is to manage the company's environmental impact at various levels. In fact, the Group plans to reduce its emissions by 50% by 2030.
Scalability
Average. Klarna doubled its efforts to diversify its various sources of revenue. It is leveraging its Klarna Kosma open banking technology and other marketing revenues. It also wants to penetrate other markets and stay there.
Mantra/Citation CEO
There is definitely a potential to quickly reach half a billion dollars in revenue in a very short period of time. / Il y a certainement un potentiel pour atteindre rapidement un demi-milliard de dollars de revenus en très peu de temps.
"And while ofcourse our ambitionsare much higher than half a percentage, it is definitely an interesting reflection of how extremely big the market is.And while of course our ambitions are much higher than half a percentage, it is definitely an interesting reflection of how extremely big the market is.
Klarna CEO Sebastian Siemiatkowski
