Commonwealth Bank’s Swedish partner Klarna posts its first annual loss

The Swedish online payments company heading for Australia as it tries to revolutionise shopping has posted its first annual loss.

Klarna CEO Sebastian Siemiatkowski in Sydney in January. Picture: Adam Yip

The Swedish online payments company which is trying to revolutionise shopping with its “buy now, pay later” system has posted its first annual loss.

Klarna, which is aimed squarely at millennial shoppers, has unveiled a net loss of 1.1 billion Swedish kroner ($172m) for last year on sales of 7.2 billion kroner. In 2018, it made a 161 million kroner profit.

Klarna blamed the losses on its investment in expansion and on higher default rates, saying that “new market entries are likely to entail higher credit loss during the initial phase”.

It is gearing up to be launched in Australia, where it has formed a partnership with the Commonwealth Bank, and it has opened a technology hub in Berlin to support its move into five more European countries.

The company, which was founded in Stockholm in 2005, offers shoppers interest-free financing that is paid off in monthly instalments. It has more than 85 million customers worldwide after doubling the number of people who use the service in Britain in the past year and increasing the number in the United States sixfold. Klarna’s UK retail partners include the fashion chains Boohoo, JD Sports, Asos and River Island.

Klarna was Europe’s most valuable financial technology company until this week, when Revolut, the banking app, raised fresh funds and matched the Swedish company’s $US5.5 billion valuation.

Until last night (AEDT) the business - which has blitzed social media and has used Snoop Dogg, the rapper, singer and actor, and Lady Gaga, the singer and actor, in marketing campaigns - had enjoyed the unusual status of being a profitable financial technology company since its launch, partly because of its deals with retailers.

Klarna makes most of its income from charging retailers a fee for its service, as well as taking interest from late-paying customers.

Klarna said that it had boosted volumes and revenues by almost a third, while it had added 75,000 new merchants to its platform in the past year, equivalent to one every seven minutes. It has 200,000 merchants in 17 markets and the volume of goods sold through Klarna rose by 32 per cent to $US35 billion.

Sebastian Siemiatkowski, 39, chief executive, said last year that the company was considering a stock market listing.

The business is working on rolling out its “buy now, pay later” service to physical shops, with Klarna touchpoints in 10,000 outlets as it wants to take market share from traditional credit cards. It does not charge interest to customers in Britain as it does in parts of continental Europe and the Nordic countries.

There are fears that the use of “buy now, pay later” systems are encouraging young people to take on debt because they see it as a risk-free way to shop beyond their limits.

The Times