Klarna

Klarna Bank AB, commonly referred to as Klarna, is a Swedish fintech company that provides online financial services. The company provides payment processing services for the e-commerce industry, managing store claims and customer payments. The company is a "buy now, pay later" service provider.

The company has more than 5,000 employees, most of them working at the headquarters in Stockholm and Berlin. In 2021, the company handled about US$80 billion in online sales. , about 40% of all e-commerce sales in Sweden went through Klarna. In 2021, the company was Europe's most valuable private tech company, at a $45.6billion valuation. However, their valuation was cut to $6.7billion in 2022 after struggling to attract additional outside investment.

History
The three founders Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson founded Klarna in 2005 after participating in the Stockholm School of Economics annual entrepreneurship competition. angel investor Jane Walerud, invested in their company and connected them with a team of programmers.

In 2007, venture capital firm Investment AB Öresund invested in the company. Three years later, Klarna started providing services in Norway, Finland, Denmark, Germany and the Netherlands. They also received an investment from Sequoia Capital, and increased their revenue by over 80% to US$54million (~400million SEK). In 2011, British newspaper The Telegraph listed Klarna as one of Europe's 100 most promising young tech companies.

In 2011, growth equity firm General Atlantic led a $155million investment round joined by DST Global, and General Atlantic's managing director Anton Levy joined the board of directors. In May 2011, Klarna acquired Israeli company Analyzd, which provided risk management and fraud prevention services

In 2013, Klarna and German Sofortüberweisung merged to become Klarna Group.

Klarna launched in the United States in September 2015, and the US has become its principal focus for future growth, after securing exclusive partnerships with luxury department store Macy's. That year, Minister of Enterprise and Innovation Mikael Damberg dubbed Klarna one of Sweden's "five unicorns", by which he meant startup companies that had succeeded in growing and attracting international investments. The other four companies were Spotify, Mojang, Skype, and King.

In September 2018, Klarna acquired Close Brothers Retail Finance from the UK Close Brothers Group.

In 2019, Klarna raised $460million with plans to expand its operations the US, with participation from Dragoneer Investment Group, Commonwealth Bank of Australia, HMI Capital, Merian Chysalis Investment Company Limited and others. This funding round valued the company at $5.5billion, making Klarna the largest fintech start-up in Europe. In 2020, Klarna acquired Nuji, a marketplace for fashion and lifestyle goods.

In 2020, Ant Financial, the payment affiliate of Chinese e-commerce company Alibaba, invested in Klarna as part of a partnership between the two firms.

In June 2021, Klarna raised $639million in a fundraising round led by SoftBank Group's Vision Fund 2, increasing the company's valuation to $45.6billion.

In November 2021, Klarna launched its physical card, which enabled users to make purchases in interest-free installments. In January 2022, Klarna launched their physical card in the UK. The card had a wait list of 400,000 users.

In March 2022, Klarna acquired PriceRunner, a company that provides price comparisons on products.

In May 2022, Klarna laid off roughly 10% of its workforce.

In June 2022, Klarna announced a partnership deal with card issuer Marqeta to bring physical Visa cards to the US.

In July 2022, Klarna raised $800million in funding at a valuation of $6.7billion. Their valuation dropped 85% in one year, in line with decreasing valuations of unprofitable technology companies. Klarna lost $580million between January and July 2022. In September of that year, Klarna announced plans to lay off an additional 100 employees. The announcement came after budget revisions due to its drop in valuation and announced losses.

Since September 2022, Klarna offers savings accounts and deposits to Spanish customers through.

In October 2022, the company launched a new "Klarna Creator" application for retailers and influencers to collaborate on brand campaigns and to track their earnings.

In January 2024, the company announced a plan for a monthly subscription plan ahead of an anticipated initial public offering later in the year. Users of the service, called Klarna Plus, would earn double the amount of usual reward points, attain access to a selection of discounts from partners like Nike and Instacart, and see service feeds waived when using the Klarna One Time Card. The fee would be $7.99 each month, as opposed to typical fees of $1 or $2 when using the service outside the network at retailers like Walmart or Costco. The company's Chief Marketing Officer, David Sandstrom, said there were also plans for a high-yield savings account in the US, with potential for subscribers to earn a higher rate than non-users.

In February 2024, Klarna announced that AI replaced 700 employees at the company, about 10% of the workforce at the time.

Regulation
In the UK, Klarna operates in the rapidly growing post-payment sector which has been criticised for encouraging consumers to get themselves into unserviceable levels of debt. In February 2021, the UK Government announced that the sector would be subject to regulation from the UK's Financial Conduct Authority.

In Sweden a large number of complaints regarding Klarna were sent to the Swedish Consumer Agency in 2014. Many customers had received reminder fees and threats about debt collection without having received a proper invoice. It was speculated if this was an unethical business model since the company made money on these reminder fees and Klarna also had a subsidiary dedicated to debt collection. The Swedish Consumer Agency also found a reason to investigate how Klarna added credit fees for partial payments. The year before the co-founder Niklas Adalberth said in a presentation during the startup conference Arctic15 that: "That is one of our revenue streams[...] the best customer is the one that doesn't pay directly but actually [gets] a reminder and then also debt collection because we are able to add the legal fees."

In Germany, the District Court of Bremerhaven ruled in 2022 that Klarna could not demand a flat rate of €1.20 for a reminder by e-mail because Klarna had not submitted any corresponding costs.

Privacy
In February 2020, Der Spiegel reported that Klarna's autofill feature allowed anyone to extract personal information, such as phone number, postal address and date of birth, only based on the email address and postal code of a customer.

In October 2020, Klarna mistakenly sent a marketing email to people who had never disclosed their contact information to Klarna. This triggered an investigation by the Information Commissioner's Office in the UK.

For a brief period in May 2021, users could view the information of other users using their own login information. Klarna claims that user information was exposed randomly, and that these exposures only contained non-sensitive data. However, users claimed that they were able to view addresses, phone numbers, and payment details of other people.

Identity thieves have used Klarna to commit fraud. They exploited Klarna's buy now, pay later scheme to make purchases with a small upfront payment on a stolen account, flip those goods at a much higher price, and then evade making payments. The company stated that its fraud checks and controls are as strict as those of banks.

In March 2022, the Swedish Authority for Privacy Protection (Integritetsskyddsmyndigheten) fined Klarna SEK7.5 million for inadequacies in its privacy notice and handling of personal data. Klarna stated it would appeal the decision for further clarification on the guidelines.

Layoffs
In May 2022, Siemiatkowski revealed it would be laying off more than 10% of its employees. A former employee described the layoffs as "chaotic". When Siemiatkowski posted a list of the fired employees on LinkedIn, several users described his post as "tone deaf".

E-commerce scams
Many Swedish e-commerce scams use Klarna as their payment solution. Additionally, there are many cases of ID thefts, when Klarna is used to make transactions in other people's names.