Klarna now worth $45.6bn after Softbank investment

·4 min read
SPAIN - 2021/05/21: In this photo illustration of a Klarna Bank AB app in in the App Store seen displayed on a smartphone with the Klarna Bank AB logo in the background. (Photo Illustration by Thiago Prudencio/SOPA Images/LightRocket via Getty Images)
The buy now, pay later company revealed that Japan’s Softbank’s Vision Fund 2 led the latest round, with additional participation from existing investors Adit Ventures, Honeycomb Asset Management and WestCap Group. Photo: Thiago Prudencio/SOPA Images/LightRocket via Getty Images

Swedish fintech giant Klarna now has a valuation of $45.6bn (£32.2bn) after it raised a fresh $639m in additional funding just over three months after its last funding round.

The buy now, pay later company revealed that Japan’s Softbank’s (SFTBY) Vision Fund 2 led the latest round, with additional participation from existing investors Adit Ventures, Honeycomb Asset Management and WestCap Group.

Its market cap represents a 47.3% increase over Klarna’s post-money valuation of $31 billion in early March, and means the company remains the highest-valued private fintech in Europe, and the second-highest worldwide.

Previous backers include Sequoia Capital, SilverLake, Dragoneer, Ant Group, H&M, money manager BlackRock, and even rapper Snoop Dogg.

As part of the Give One initiative established by Klarna earlier this year, 1% of the equity raised will be directed to projects supporting planet health, the company said.

It comes as customers are demanding smarter alternatives to shop, bank and pay as the shift to online continues.

Read more: COVID-19 will permanently change how we shop, says Klarna CEO

“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," said Sebastian Siemiatkowski, Klarna founder and chief executive.

“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 I’m very proud of the investors who are supporting Klarna’s ambition to challenge these outdated models to empower consumers with fair, transparent, and convenient products to help them bank, shop and pay each day.”

In its most recent results, the company posted more than $18.1bn in volume in the first quarter compared with $9.9bn in the same period a year ago. In 2020 it processed a total of $53bn in volume and hit over a billion in revenue.

Klarna, which was founded in 2005, is also currently pushing its business in the US, with the volume of payments processed by the company in America surging 296% in the fourth quarter.

Yanni Pipilis, managing partner for SoftBank Investment Advisers, said: “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 US and we are excited to continue supporting the team in bringing the next generation of financial services to new markets worldwide.”

Read more: Watchdog to crack down on £2.7bn 'buy now, pay later' industry

Klarna is used by 18 million Americans, up from 10 million at the end of last year’s third quarter, as well as at more than 250,000 retailers globally. It has more than 90 million active users and more than 2 million transactions a day made on its platform.

In the app, consumers can browse and shop at any brand online with Klarna payment options, allowing them to pay immediately or later, manage spending and available balances, add favourite items to collections, initiate refunds, access tailored discounts, receive price-drop notifications, track deliveries and join Klarna’s loyalty program, Vibe.

Klarna's success has spawned a host of other so-called "buy now, pay later" companies such as Clearpay and Afterpay. The market is heavily associated with online fashion, rather than big-ticket electronics which dominated the rent-to-buy market. Buy now, pay later purchases in the UK quadrupled last year to hit £2.7bn.

However, over the last year the "buy now, pay later" market has attracted scrutiny from regulators who fear that the ease of taking out loans could lead people to overextend themselves.

Politicians have also sounded the alarm over unaffordable debt. The UK's Financial Conduct Authority said earlier this year there was an "urgent" need to regulate the market.

Watch: Should I pay off debt or save money during the coronavirus pandemic?