Klarna has become the largest European fintech company to secure a banking licence, with the Swedish group saying it wants to become a Ryanair-type low-cost disruptor of the sector, attacking established lenders across the continent.
Valued at more than €1.7 billion, Klarna has already captured much of the market for online payments in the Nordics and Germany. On Monday, it received a banking licence from the Swedish Financial Supervisory Authority, 20 months after filing for one.
"We want to be part of reshaping the retail banking industry. New regulations . . . set the right prerequisites for the destruction of that industry, but it needs a Ryanair to come along. We want to be that player," according to Sebastian Siemiatkowski, Klarna's chief executive.
Fintech groups in Europe and the US, such as SoFi and Zopa, have been seeking full banking licences, but Klarna – with its 60 million customers across Europe and €13 billion in transactions processed last year – is one of the largest.
Fundraising
The Swedish group, which had revenues of SKr3.6bn (€369 million) last year and was valued at €2 billion in a fundraising in 2015, is looking at offering European customers services such as bank cards and salary accounts, as well as eyeing the US for future expansion.
Klarna, which is profitable, started off by allowing customers to buy and receive goods before paying for them, taking on the credit risk for retailers. Mr Siemiatkowski has long had traditional banks in his sights, believing they offer poor customer service at inflated prices.
He added that he thought an “iPhone moment” was coming in the banking industry, when a new product – likely from fintechs – would completely change the sector.
“Banks are challenged. In the tech world, these companies get outcompeted very quickly if they don’t deliver. But due to regulation, banks with very old technology – and poor customer satisfaction – have been able to prevail,” he said.
“What we have seen in all other industries – take retail – is global players [emerging] such as H&M and Zara. Global but more specialised. When a market grows, specialisation increases. We are going to see more specialised customer offerings [in finance] that are at the same time global.”
Expand
The Swedish company, which was founded in 2005 by three friends, has changed its legal name to Klarna Bank, but will remain as Klarna for branding purposes. Mr Siemiatkowski said the banking licence would help it expand in places such as the US.
"Outside Sweden, we have been seen as 'kind of a bank'. To establish services, talk to regulators - [the banking licence] just provides a level of confidence: what kind of animal are you. It's about legitimacy and trust," he added.
Mr Siemiatkowski stressed that Klarna was not considering an IPO anytime soon, as he underlined his scepticism of “quarterly capitalism”. He conceded that it might make sense “at some point of time” but added “we still want to grow fast”.
Klarna would stick to areas related to payments and not go into mortgages and other services, he added, saying he expected other fintechs to attack banks there.
– (Copyright The Financial Times Limited 2017)
