FinTech: Losses Escalate At Swedish Fintech and BNPL Provider Klarna

August 31, 2020 | FinTech, News
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The European fintech, valued $5.5 billion, lost nearly $60 million in the first half of 2020.

The red ink at Klarna, the Buy-Now-Pay-Later (BNPL) financing provider so popular with shoppers, is splashed rather prominently across its financial report for the six months ended June 2020. Expansion costs and provisions for losses on credits given to customers mainly accounted for the net loss of 522 million Swedish krona ($59.8 million) during the period. That’s up nearly 7X from its loss of 73 million krona in the same period last year. (CNBC)

On a positive note, Klarna, a regulated bank, said its operating income rose 37% compared to last year to 4.6 billion krona. Furthermore, its GMV, or gross merchandise volume, surged 44% to 215 billion krona.

Hastening slowly amidst COVID-19

The company positions itself as a simpler, healthier, and smarter alternative to credit cards. It said the COVID 19 pandemic forced it to be cautious in its policies.

Despite that, its credit losses nearly doubled to around 1.2 billion krona during the half-year.

“In the context of Covid-19 and the uncertainties it has unfortunately created for so many, a somewhat precautionary approach was necessary at times, including adjusting our credit policies globally,” Klarna co-founder and CEO Sebastian Siemiatkowski said in a letter to shareholders. “Despite this, we have seen accelerated growth and rapidly increasing demand for our services.”

However, the fintech said there was little reason to worry given the strength of its balance sheet and the credit quality indicators of the US consumer – currently at an all-time high.

Nevertheless, the loss-making first half of 2020 follows a 2019 result in which Klarna reported a loss of 1.1 billion Swedish krona ($113 million) on revenues of 7.2 billion krona. This was the first annual loss it reported since it was founded in 2005.

However, growth ticking higher

In its statement, Klarna provided some key market metrics.

  • Added 35,000 retailers to its global base of more than 200,000
  • Added nearly 14 million new consumers
  • In the US, consumers grew by 550% compared to the same period in 2019
  • In the UK, consumers grew by 120%
  • The number of total monthly active users nearly doubled to 12 million
  • Klarna’s app is currently recording 45,000 installs per day, three times faster than last year
  • Volumes at the company’s in-store proposition have grown more than 75% over last year across more than 13,000 stores
  • Added many new retailers that are global brands.

Related Story:  Klarna payments platform hits $5.5 billion valuation                                                 

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