Online payments firm Klarna, which has attracted a growing following with its “buy now, pay later” service for shoppers, said it had raised $460 million in a funding round that makes it Europe’s most valuable fintech startup.
Swedish payments and credit business Klarna became Europe’s most valuable private financial technology business being valued at $5.5 billion in a funding round in which it raised $460 million.
The biggest investors are Dragoneer Investment Group from San Francisco. This is a fund mainly oriented on growth funding. Just for comparison, European fintech business TransferWise and online-only bank N26 are both valued at $3.5 billion.
As they said from the company, this money will help Klarna to continue its rally in the US market, that has been claiming growth of 6 million new US customers per year. Consumers nowadays are not thrilled with traditional revolving credit lines so they opt to choose some more alternative and flexible ways of financing. The company also recently launched a shopping application that allows its users to shop with it at any store or brand online. As for now, this company’s move has been received very promising, with now more than 50% of the app users shopping each week.
The company uses smart technology to make sure it doesn’t lose out and wants to show as a smarter alternative to using a credit card. For retailers, Klarna can help boost sales and for now, it has been offered alongside credit, debit or PayPal options when shoppers reach the online checkout at more than 130,000 retailers including brand names as are JD Sports, Topshop, and Asos.
Since its launch in 2005, Klarna has gained popularity among millennials and so-called Generation Z, both generations who aren’t really fond of cash and who want to shop before payday.
It now has 60 million users worldwide, and with 1 million transactions processed per day, Klarna says it is on track to make $1 billion in annual revenue. The company charges fees to merchants and customers who fail to pay on time.
Sales jumped by 36% to $26.31 billion last year, Klarna said, and it now works with 130,000 merchants globally. Over 1 million sales a day use Klarna globally.
To date, Klarna has raised over $1 billion to fuel its growth, including a $100 millions they have raised in April. The business has attracted money retailers like H&M, fund manager BlackRock, and even famous rapper and investor Snoop Dogg, who has also advertised the business.
Sebastian Siemiatkowski, co-founder and CEO of Klarna, called this a decisive time in the history of retail banking.
“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.”
Richard Watts from Merian Chrysalis Investment Company said that Klarna has built a highly-impressive, digital payment ecosystem, trusted by both retailers and consumers. He claims that by simplifying and improving the flexibility of the payments process, retail partners working with Klarna have seen a 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.”
Marc Stad, a founding partner at Dragoneer, said that their 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.”