Every day at 5pm, Klarna chief executive Sebastian Siemiatkowski sits down at home and provides a video update to staff about how the “buy now, pay later” company is doing. Once a week, all the top executives at the Swedish group — Europe’s joint most valuable unlisted fintech — hold a virtual town-hall meeting to answer workers’ questions about the coronavirus crisis.
The economic disruption from the pandemic is hitting some fintechs hard, and payment companies are under special scrutiny as investors worry about how overextended consumers might pay back their credit.
Klarna has long been in the spotlight in its native Sweden over its credit practices. Last week a new law was even passed that makes ecommerce companies unable to offer credit as a default option.
But Klarna — which gets most of its revenues from fees from merchants rather than consumers — insists that so far it has been little affected by coronavirus. In some countries, it has already toughened its credit criteria, making it harder for people to get into debt.
It is also helped by its focus on ecommerce over bricks-and-mortar retail. There are growing concerns that some retailers such as Hennes & Mauritz may use the crisis to cut the number of physical stores they have and push more online, where Klarna’s solutions are more popular.
Another advantage Klarna has is its recent bout of fundraising. It raised $460m last August in a funding round which not only lifted its valuation to $5.5bn — equal with the UK’s Revolut — from $2.5bn at the start of 2019, but also strengthened its balance sheet.
Big Swedish banks are some of the best capitalised in Europe with common equity tier-1 capital ratios of about 17-18 per cent. But Klarna, which is regulated as a bank after receiving its licence three years ago in Sweden, had a capital ratio of 28 per cent at group level at the end of 2019. That gives it a decent buffer to deal with any problems that come out of coronavirus.
It also minimises the need to do an initial public offering, even if Mr Siemiatkowski had been talking up the possibility of a flotation at the end of last year. He has long said that Klarna is in most ways ready for an IPO but that it is “more of a question of timing and focus”.
The Swedish fintech has been pouring significant money into cracking the US, dragging it to its first ever financial loss last year. Its investors — from Sequoia Capital and Permira to H&M and most recently China’s Ant Financial — seem happy with that approach so far.
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Quick Fire Q&A
Company name: ABAKA
When founded: 2016
Where based: London
CEO: Fahd Rachidy
What do you sell, and who do you sell it to: A digital retirement system that enables financial institutions to engage their customers with conversational AI and intelligent behavioural nudges.
How did you get started: Fahd founded ABAKA after seeing how his father could not get his full pension or access financial advice.
Amount of money raised so far: $10m
Valuation at latest fundraising: n/a
Major shareholders: Anthemis, Thames Trust, Downing Ventures, Ace & Co.
There are lots of fintechs out there — what makes you so special: ABAKA is the first fintech helping retirement providers and global retail banks deliver AI-powered, hyper-personalised digital retirement services.
Further fintech fascination
New frontiers: Insurer Ageas has teamed up with Tractable to develop a system that uses artificial intelligence to assess vehicle damage after accidents and create an estimate of repair costs, reports Insurance Journal. The technology was trialled in the UK last year, and Ageas now plans to use it on thousands of claims every month.
Follow the money: Fast, a San Francisco-based payments company, has raised $20m in a funding round led by Stripe, according to Finextra. Fast’s technology allows users to complete payments with one click on any device or browser. The money will enable the company to roll out its products more quickly and grow its product and engineering teams.
New frontiers (2): Sifted has interviewed Plaid’s Keith Grose on the San Francisco-based fintech’s push into Europe. The company now operates in five European markets and has a local staff of 25, but it has ambitions to expand to over 40 markets. Mr Grose said that the European expansion has been a “challenge” but added that Plaid’s traction in Europe is “encouraging”.
Follow the money (2): Tink, a European open banking platform, has bought account aggregation specialist Eurobits, says pymnts.com. Eurobits already works with big names in banking including Santander, Sabadell and BBVA, and the deal will help Tink to grow in Europe.