Klarna raises $460m to become Europe’s largest private fintech firm

Klarna

Klarna, the payments firm best known for its popular Pay later service, has raised $460m in an equity funding round. The deal values Klarna at $5.5bn making it Europe’s largest private fintech firm.

The Swedish bank, which works with a host of retail businesses around the world including ASOS, Arcadia Group, Moss Bros and Superdry in the UK, said the funding would enable it to continue its rapid expansion in the US. Earlier this week it extended its relationship with ASOS to its US customers.

Klarna says its service, which acts a “healthier, simpler and smarter alternative to credit card“, is attracting more than 6m US customers a year. As well as offering the option to buy now, pay later, Klarna also enables customers to slice payments into instalments when shopping both online and in-store.

In the US, some 3,000 merchants are already offering Klarna including Toms, Sonos, Acne Studios and rue21. Merchants who are offering its “‘Pay in 4” option are reporting a 68% increase in average order value, a 44% increase in conversion compared to cards and 21% higher purchase frequency, Klarna reports.

Global brands H&M, Abercrombie & Fitch and Boohoo Group will soon go live with Klarna in the US and there are currently more than a 1,000 merchants integrating with the payments provider with a combined volume of $10bn.

Globally, Klarna is serving more than 60 million consumers, 130,000 merchants partners, is processing 1 million transactions daily and is in sight of a $1 billion annual revenue.

Klarna
Sebastian Siemiatkowski

Sebastian Siemiatkowski, co-founder and CEO of Klarna: “This is a decisive time in the history of retail banking. Finally, transparency, technology and creativity will serve the consumer, and there will be no more room for unimaginative products, non-transparent terms of use or lack of genuine care of ones customers.

“We, all 2,500 of us at Klarna, are humbled and honoured, and now also further empowered, to play a role in this improvement of an industry for the benefit of the consumer, worldwide and in the US in particular.”

The funding round was led by Dragoneer Investment Group, a leading San Francisco based growth-oriented investor. Other investors in the round include Commonwealth Bank of Australia, HMI Capital LLC, Merian Chrysalis Investment Company Limited, Första AP-Fonden (AP1), IPGL, IVP and funds and accounts managed by BlackRock.

This investment follows a funding round in April of this year that closed above the company’s $100 million target, driven by strong demand from Klarna’s existing investor base.

Marc Stad, Founding Partner at Dragoneer said: “Our strategy is to partner with a small number of disruptive, growth companies that are highly differentiated and run by world-class management teams. Sebastian and the Klarna team have built an exceptional payments business with a global footprint, operating in a huge addressable market with strong tailwinds.”

Richard Watts, Merian Chrysalis Investment Company added: “Klarna has built a highly-impressive, digital payment ecosystem, trusted by both retailers and consumers. By simplifying and improving the flexibility of the payments process, retail partners working with Klarna have seen considerable improvement in customer engagement and sales.

“Klarna is one of Europe’s great fintech success stories and the company continues to develop truly innovative payment solutions. This latest funding round will enable the company to execute on its ambitious international growth plans.”

Read our recent interview with Sebastian Siemiatkowski here.