Swedish-based BNPL giant Klarna raised more than $639m in a new private fundraising round, led by Japan’s SoftBank, boosting its valuation to almost $46bn, making it the second-biggest FinTech startup by valuation after Stripe.
The newly quadradecacorn’s existing investors Adit Ventures, Honeycomb Asset Management and WestCap Group also participated in the raise.
In the past, Klarna has also received backing from Sequoia Capital, SilverLake, Dragoneer, Permira, Commonwealth Bank of Australia, Bestseller Group, Ant Group, Northzone and GIC as well as funds managed by BlackRock and HMI.
Klarna will use the new cash injection to continue to expand internationally and to develop new products. It has been investing heavily in the US, where it now has 18 million customers.
The new valuation represents an increase of almost 50% from Klarna’s post-money valuation of $31bn in March when it raised $1bn.
Klarna, a regulated bank, touts itself as an alternative to credit cards. It allows shoppers to buy online through merchant partners including Abercrombie & Fitch, Nike and Peloton among others and split payments into interest-free instalments.
Commenting on the mammoth round, Klarna CEO Sebastian Siemiatkowski said, “Consumers continue to reject interest-and fee-laden revolving credit and are moving toward debit while simultaneously seeking retail experiences that better meet their needs.
“Klarna’s more transparent and convenient alternatives align with evolving global consumer preferences and drive worldwide growth. I’m very proud of the investors who are supporting Klarna’s ambition to challenge these outdated models to empower consumers with fair, transparent, and convenient products to help them bank, shop and pay each day.”
Echoing a similar sentiment, SoftBank Investment Advisers managing partner Yanni Pipilis added, “Klarna’s growth is founded on a deep understanding of how the purchasing behaviours of consumers are changing, an evolution which we believe is accelerating.
“Klarna has already successfully expanded into the U.S., and we are excited to continue supporting the team in bringing the next generation of financial services to new markets worldwide.”
The use of BNPL services has indeed surged during the Covid-19 pandemic. A recent review by the UK Financial Conduct Authority’s former interim chief executive, Christopher Woolard, found that the value of transactions using BNPL had nearly quadrupled between January and December 2020. Overall BNPL is around 1% of the total credit market, the review found.
This funding round provides GiveOne, the initiative to support planet health established by Klarna earlier this year, with its third significant donation since launch. Recent investor A$AP Rocky pledged to support the Miti Alliance in Kenya and its founder Michael Waiyaki, who is fighting to slow down the effects of climate change due to deforestation. Klarna has also launched a CO2 tracker on every purchase.
It’s worth noting that investors continue to pump in money towards BNPL ventures despite the sector being criticised for putting customers’ financial well-being at risk. In response, regulators in the US and the UK have either launched or are expected to introduce new rules for the BNPL market.
Klarna witnessed a record annual revenue of $1.2bn in 2020. However, losses also climbed 50% to about $109.2m due to increased costs associated with its international expansion.
Klarna was also hit with a data breach last month, with users reporting they were being accidentally logged into other people’s accounts. The firm temporarily shut down its app. In a blog post, Klarna said the issue, which affected more than 9,500 users, was a bug caused by “human error,” and that it had “informed appropriate authorities.”
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