Sweden’s Fintech Unicorn Klarna has seen its losses increase significantly during the first 9 months of this year, as costs surged considerably amid growing demand for flexible payment options like Buy Now, Pay Later (BNPL) services.
The Stockholm-headquartered company is reporting a pre-tax loss of 3.1 billion Swedish krona (appr. $344 million) from January to September 2021. This represents a 4x increase from the 800 million krona that Klarna reported in losses for the same period a year back.
Klarna, which had been privately valued at approximately $46 billion, has reported total operating income of 9.8 billion krona, which is up a sizable 40% from the past FY.
As reported by CNBC, the majority of these losses have resulted from general administrative costs, which came out to around 9.5 billion krona. This figure has increased from just 5.9 billion krona for the past financial year.
Credit losses have also increased substantially, currently amounting to 2.9 billion krona YTD. This figure is a lot greater than the 1.6 billion krona reported for the same period in the previous financial year.
A Klarna representative told CNBC that the company has expanded operations into 9 other markets since the beginning of last year and claims more than 90 million customers globally.
A Klarna spokesperson stated:
“Each market entry follows a consistent financial trajectory; as volumes grow, and more customers use Klarna, market knowledge improves and credit risk decreases, making mature markets sustainably profitable.”
Klarna is notably one of the most prominent firms dominating the BNPL sector. These pay over time options allow consumers to split the cost of their purchases into more manageable installments, which are interest-free in most cases.
Klarna and competitors such as Afterpay and Affirm report making most of their earnings from the extra fees they may charge merchants for handling transactions. Some of the firms also generate revenue from late payment charges and interest having to be paid on long-term installment loans.
BNPL products are seeing rapidly rising usage since the past year, because of the boom in digital commerce activity which has been accelerated by the COVID-19 crisis.
Millions of consumers are now using a BNPL service to help with paying off their purchases. Due to the increased use of such payment options, companies are launching a wider range of solutions, allowing consumers to pay for items with installments plans.
Large firms such as PayPal are also introducing their own pay over time products, while Amazon and Apple are teaming up with companies like Affirm. As covered, Square has tried to move into the fast-growing BNPL market with its move to acquire Afterpay as part of a $29 billion transaction.
Notably, Klarna has been focused on entering the US and UK markets. The firm has maintained around an 18% share of the US BNPL market as of November 17, 2021 (as reported by CNBC which referenced figures provided by research firm YipitData). However, Klarna is still well behind Affirm, which maintains a 36% market share while Afterpay has captured 21%.