How Klarna Bank service works

The payment service of Klarna Bank from Sweden attracted 650 million dollars. Thus, its value was estimated at 10.6 billion dollars. The service managed to become the largest company in this sphere in Europe, and to take the fourth position in the world.
Investors of Klarna were the Singapore sovereign fund, BlackRock, Silver Lake Partners and other well-known companies.
Before the next round the service was estimated at 5.5 billion dollars. Klarna’s direct competitors in Europe had the same amount – Revolut and Checkout. Stripe company from the U.S. is the leader in the world market, which cost 36 billion dollars. The second place is occupied by fintex service from India with an estimated $ 16 billion, the third – the American Robinhood with $ 11.2 billion.
Klarna Bank has more than 12 million users per month, and during the pandemic the popularity of the platform has increased dramatically. It managed to enter the global market and expand the list of retail partners, so that during the first 6 months of 2020 the volume of transactions conducted using the service increased by 44% to 22 million dollars. Revenue grew by 36% to $466 million.

Klarna service appeared in 2005 and was originally designed to work with online stores. In 2017 the company obtained a banking license and significantly expanded the range of services provided. According to one of the founders of Fintech, the goal of creating the platform was to increase users’ trust in online stores. In the early 2000s, the e-commerce segment was only developing, so the problem of anxiety among people was urgent. And Klarna became an intermediary between buyers and stores using a factoring model. The name of the service is translated from Swedish as clear. The application provided security for both sides of the purchase. It took over the payment for the goods to the online store, and the customer sent money to the service after receiving the parcel. After a while it became possible to register various credit products.
To start its activities, Klarna received money from a business angel, the investment amounted to 60 thousand euros. Now the company cooperates with more than 130 thousand online stores, the service provides customers with options for purchasing goods in installments. In addition, customers can pay for goods not immediately when placing an order, but after 14 days, sometimes even within a month. If the customer has not paid off the debt on time, his data are transferred to the collectors. In the case of a large amount, it can be divided into monthly payments, which is a loan where the annual rate does not exceed 18.9%. The term of the loan is from 3 months to 3 years.