Klarna Bank AB is adding retail-banking services in the US and across much of Europe, expanding beyond its signature buy-now, pay-later offering as the fintech prepares for an initial public offering.
Customers of the financial-technology company in 12 countries will newly have the option to add money from their bank account to a digital wallet, called Klarna balance, where they can get cash-back rewards for shopping in the Klarna app or receive refunds from returned items, according to a statement Thursday.
In Europe, where Stockholm-based Klarna already has a banking license and is overseen by Swedish regulators, the fintech will be offering interest rates of as much as 3.58% for savings. The latest move marks an expansion on its offerings in Germany, where customers have had access to accounts with savings and cash withdrawals since 2021, and will allow Klarna to compete with such US behemoths as JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co.
In the US, where Klarna doesn’t have a banking license and operates through a partner bank, the firm will allow consumers more limited services without the savings option, more akin to a digital wallet like those offered by PayPal Holdings Inc.’s Venmo or Starbucks Corp. Unlike US bank accounts, the money in Klarna accounts isn’t protected by the Federal Deposit Insurance Corp.
Klarna is looking to diversify its funding streams ahead of a planned IPO in the US. About 90% of the firm’s funding comes from deposits already. The firm is considering seeking a valuation of around $20 billion in an IPO, people familiar with the matter told Bloomberg News earlier this year. The new European markets where customers will have access to bank accounts include France, Italy, the Netherlands, Austria and Spain.
Klarna recently introduced a Visa buy-now, pay-later card in the US, an offering available for longer in Sweden, Germany and the UK. Klarna has been growing fast in the US, where its partners include Walmart Inc. Revenue in the US, now Klarna’s biggest market, rose 38% in the first quarter from a year earlier.
Buy now, pay later — the offering Klarna remains best known for — is subject to few regulations in Europe, the US and the UK. Klarna added late fees last year, which resulted in more customers keeping up with their payments.
