Discussions reportedly involve multiple banks, including Citigroup, RBC, Nordea, and Société Générale. The move is part of Klarna’s preparations for a highly anticipated public listing in New York, expected in the first half of 2025. The company aims to reinforce its lending capacity to attract potential IPO investors.
Klarna previously executed a similar strategy in the UK, where it sold its BNPL portfolio to Elliott Management in a bid to free up capital for approximately GBP 30 billion in new loans. The ‘pay-in-four’ option, available at retailers’ checkouts, enables customers to divide purchases into four interest-free payments made every two weeks.
In contrast to Klarna’s UK ‘pay-in-three’ product, which allows monthly payments, the US BNPL model is newer and may carry a higher risk of defaults, according to one source. A report from the US Consumer Financial Protection Bureau revealed that nearly two-thirds of BNPL loans in 2022 were issued to borrowers with lower credit scores, many of whom held multiple loans simultaneously.
Private credit groups have become significant partners for BNPL providers such as Klarna, SoFi, and Affirm. These firms have increasingly sold loan books to private investors, such as insurers, to reduce balance sheet risk while ensuring a steady flow of funds for new lending. Recent transactions have involved major investment firms such as KKR, Carlyle, Sixth Street, and Fortress, which are drawn to higher-yielding debt portfolios.
As part of its risk management efforts, Klarna implemented a major risk transfer in 2022 to mitigate exposure to loan defaults while supporting increased lending. Once regarded as Europe’s most valuable start-up, with a USD 46 billion valuation in 2021, Klarna faced a sharp decline in 2022 as rising interest rates dampened investor confidence in the sector. Its valuation dropped to USD 6.7 billion during a funding round that year.
It’s worth noting that the company’s anticipated USD 15 billion IPO valuation would mark one of the largest stock market listings following a challenging period for equity markets in 2024.
For more information about Klarna, please check out their detailed profile in our dedicated, industry-specific Company Database.
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