Klarna raises $460 million, looks to expand its payments presence in the U.S.
Swedish payments provider Klarna has announced a new round of equity funding, adding $60 million at a post-money valuation of $5.5 billion, which makes it one of the most highly-valued private fintech companies in the world. The new funding will be used to help Klarna continue to grow its presence in the U.S. payments market, the company said in a press release.
Klarna's European presence is strong, based on the back of its credit card-alternative payment method which allows customers to pay over time, with the purchase price broken up over four equal instalments, but directly from their bank accounts and without incurring any interest. The company also offers pay now options to provide both retailers and their customers so people can pay more traditionally, too.
In Europe, the mode has been a tremendous success because it's more in line with how customers in many European markets prefer to pay anyway - avoiding credit and opting for cash and debit. Klarna is also riding the rise of pay later options that are increasingly popular in U.S. commerce, including offerings like purchase financing from Affirm.
Once reserved for big ticket items, interest-free, instalment based payment programs are increasingly common, and popular, for lower-cost purchase. Affirm, for instance saw total loan volume cross $2 billion in 2018. Klarna, meanwhile, is currently growing in the U.S. at a rate of around 6 million new customers annually, and it counts over 3,000 U.S. merchants as customers. Per order value is also growing among customers using Klarna's 4-payment instalment option, the company says: Average order value is 68% higher when using this option, with a 44% higher conversion rate (ie. customers actually following through with the purchase) vs. traditional credit card payments.
The new funding for Klarna is led by Dragoneer Investment Group, and includes participation by Commonwealth Bank of Australia, HMI Capital LLC, Merian Chrysalis Investment Company Limited, and more.