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$ 46 billion fintech Klarna sees losses quadruple as a consequence of rising demand for "purchase now, pay later"

The Klarna logo that appears on a phone screen.

Jakub Porzycki | NurPhoto | Getty Images

LONDON – Swedish fintech startup Klarna posted losses in the first nine months of 2021 as costs rose sharply amid increasing demand for services that buy now and pay later.

The Stockholm-based company posted a pre-tax loss of 3.1 billion Swedish kronor ($ 344 million) from January to September, a four-fold increase compared to the 800 million kroner it lost in the same period last year.

Klarna, which was last privately valued at $ 46 billion, recorded a net operating profit of 9.8 billion crowns, 40% more than last year.

Most of the losses came from general and administrative expenses, which amounted to 9.5 billion crowns, compared to 5.9 billion crowns in the previous year.

The loan defaults also increased significantly and amounted to a total of 2.9 billion kroner since the beginning of the year, more than the 1.6 billion kroner in the same period of the previous year.

A Klarna spokesman told CNBC that the company had opened up nine new markets since early 2020 and now has over 90 million customers worldwide.

“Every market entry follows a consistent financial course. As volumes grow and more customers use Klarna, market knowledge improves and credit risk decreases, making mature markets profitable over the long term, "the spokesman said in a statement sent via email.

Klarna is one of the biggest players in the fast growing Buy Now, Pay Later (BNPL) market. BNPL products allow buyers to split the cost of their purchases into a series of equal monthly installments, often interest-free.

Klarna and competitors like Afterpay and Affirm make most of their revenue from the fees they charge merchants for processing transactions. Some also make money from interest on late payments and interest on longer term installment loans.

BNPL products saw soaring demand last year, thanks in no small part to an accelerated adoption of e-commerce triggered by the coronavirus pandemic.

Millions of shoppers are now using a buy-now-pay-later service to fund their purchases. And the possibilities are more diverse than ever.

Meanwhile, big companies are jumping on the bandwagon, with PayPal launching its own product, Amazon and Apple partnering with Affirm, and Square agreeing to buy Afterpay as part of a $ 29 billion deal.

Klarna has been aggressively expanding into the US and UK lately. According to figures made available to CNBC by research firm YipitData, the company controlled around 18% of the US BNPL market on November 17, trailing Affirm with 36% market share and Afterpay with 21%.

In the UK, Klarna has launched a charm offensive, meeting with political leaders to enact new rules that would bring the BNPL sector under regulatory oversight.

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