Klarna F-1 Breakdown

Klarna filed its prospectus last week, revealing the metrics and mechanics behind one of the most structurally ambitious consumer fintechs to scale globally. Born as a payments workaround in Sweden, Klarna now processes over $100B in annual volume, operating at the intersection of credit, checkout, and consumer experience.

It’s easy to get lost in the 315-page filing and miss the broader signal: Klarna represents a reconfiguration of consumer credit mechanics — one that builds on the same merchant-funded foundation as credit cards, but delivers liquidity in a more dynamic, embedded, and transparent form. For the fintech ecosystem, Klarna marks a foothold — and a signal — that alternative credit architectures can scale.

The Business

Klarna was founded in Sweden in 2005 with a straightforward proposition: allow online shoppers to pay by invoice after delivery — a localized take on cash-on-delivery adapted for e-commerce. Since then, the company has scaled into a global payments and credit platform, operating in 26 countries, with over 93mm active users, over 500,000 merchant relationships, and $105b in GMV processed in 2024. [1]

Merchant fees remain the core revenue engine, accounting for 57% of total revenue in 2024. These are tied not to payment processing, but to performance — Klarna boosts conversion and basket size, and merchants pay for the incremental lift. It’s structurally similar to how interchange and interest revenue fund credit card rewards; Klarna just routes the economics differently. Merchant fees subsidize (typically) interest-free installment payments.

The rest of the revenues include:

• Late fees, rebranded as “reminder” and “snooze” fees (optically softer, functionally the same)

• A smaller personal loan business, interest-bearing but not core to the model

• Retail media, sold through Klarna’s app and merchant-facing ad tools, now a ~$180mm line item

• Some interchange, via Klarna’s card product in the U.S.

Klarna runs nearly 3x the GMV of Affirm, its American counterpart, but produces similar revenue — a function of its lighter credit exposure. [2] Historically, capital has been centralized and on balance sheet (that has somewhat changed as Klarna as of last year has explored securitizing its loan packages). Klarna Bank raises deposits (primarily in Europe) and taps wholesale funding markets, then allocates that capital across markets and products. Unlike marketplace lenders, Klarna historically underwrites, funds, and holds the credit risk directly which gives the business tighter control over unit economics, loss rates, and capital velocity. With an average loan term of just 40 days, Klarna turns its capital quickly and minimizes duration exposure.

What Klarna is really selling in reading this prospectus is a commerce network. The business isn’t limited to its core lending product or its newer adjacencies but a system to connect distribution, capital, and consumer behavior in one unified flow. So Klarna doesn’t just process a transaction. It generates demand, underwrites it in real time, finances it off its own balance sheet, and monetizes it on both sides — merchant and consumer.

1. Checkout as a Moat, Not a Feature

   Klarna has outlasted multiple platform shifts by anchoring itself to checkout. Upstream, discovery is constantly rewritten, from search to social commerce now perhaps to AI-native interfaces. Downstream logistics and fulfilment has endured an unenviable few years from Covid shortages to supply chains reconfigurations now to tariffs. Klarna’s more immune positioning matters. Most intermediaries built on top of other platforms eventually get squeezed, either into commoditization or margin compression. Klarna built a defensible checkout layer with its own underwriting engine, consumer brand, merchant relationships, and monetization surface such that take rate has expanded (2.3% in 2022 to 2.7% in 2024).

   It's a worthwhile case study in future-proofing in sectors — like commerce and fintech —where the only constant is change, on how businesses, even if totally innovative in one function, can be resilient to how the rest of the stack, category, even economy is evolving.
   

2. Credit Cards Aren’t Destiny

   It’s fair to question whether Klarna is meaningfully better for consumers than traditional credit. Yes, most of its revenue comes from merchant fees, not interest or penalties. It underwrites each transaction individually. It caps loan duration. And it’s structurally less reliant on yield than peers like Affirm. Still, a recent CFPB report on BNPL flagged familiar risks: fragmented debt visibility, consumer overextension, and light-touch protections. [3] We’ll leave that question to regulators.

   That debate, albeit important, shouldn’t obscure a broader signal: credit cards aren’t the inevitable endpoint for consumer payments. Klarna does run on the same underlying principle — merchants subsidize consumer liquidity — but through a restructured set of mechanics. No revolving balance. No bill to manage. No APR math. Instead, credit is embedded at checkout, priced into conversion lift, and invisible to the consumer beyond a few taps.

   In many ways, Klarna offers a clearer expression of what cards were always doing: routing value from merchants to consumers to close a transaction. The difference is packaging — and precision. Klarna brings that model into mobile-native flows, strips out legacy baggage, and aligns incentives more transparently across all sides of the transaction. That it scaled in the U.S., despite the cultural entrenchment of credit cards and the economics of uncapped interchange, speaks to how overdue that reframing was.

   As a final takeaway: Klarna doesn’t necessarily signal the death of credit cards — its use case is relatively narrow, focused on short-term, discretionary purchases where liquidity at checkout reduces friction and boosts conversion. The average loan balance is just $87, and the average duration is 40 days. But within that scope, it exposes fault lines in the traditional model. By proving that consumers will adopt alternative credit structures, Klarna opens the door for others to reconfigure the underlying mechanics of access, risk, and reward.

3. A good day to be long Europe

   Klarna offers a timely reminder that Europe remains capable of producing not only exceptional founders (we’ve known that), but consumer businesses that scale across geographies without sacrificing their home market. Amid skepticism around European markets (see ‘peak pessimism’), Klarna is a transatlantic refutation.

   The company processed over $42b in GMV from the U.S. in 2024, making it Klarna’s largest single market. That volume is supported by some of the market’s largest logos like Instacart, Nike, Airbnb, Macy’s, and, as of this past week, Walmart’s OnePay (a partnership nabbed from its American counterpart Affirm). That scale did not come at the expense of Europe, where penetration remains particularly high in the Nordics such that 82% of adults in Sweden used Klarna last year.

   This transatlantic scale is especially impressive in consumer credit because American consumers are uniquely loyal to credit cards, driven by a deeply embedded rewards ecosystem and a high-interchange, high-revolver model that has proven difficult to dislodge. More will follow.

4. A different AI story

   Klarna talks about AI for a company that does not sell AI. The core product — transaction-level credit and checkout — doesn’t rely on generative models, LLMs, or novel algorithmic infrastructure. The underwriting engine is proprietary, but traditional. The consumer experience doesn’t feel AI-native.

   Rather what Klarna has done is apply AI to real operational leverage, like its partnership with OpenAI to launch AI customer service assistants (which covered 2.3mm conversations in their first month live) [4]. The clearest impact is in human efficiency; revenue per employee more than doubled, from $344K to $821K in just two years. Other nuggets:

   • 62% of customer support chats are now handled by AI, with no drop in satisfaction.

   • $7 million in Q1 marketing savings, 37% attributed directly to AI-led automation

   • 1,390 vendors cut following AI standardization across internal workflows, perhaps most notably Salesforce to develop a home-grown AI native CRM [5]

This is a case study in what’s possible when a scaled financial services business systematically deploys AI to collapse its cost base. That kind of leverage points to the larger opportunity in the ecosystem: AI deployed across financial institutions to make products cheaper to operate and cheaper to deliver, the kind of cost consolidation that can unlock a financial institution’s next 93mm users.

What did we miss? Email us at ryang@nea.com, pchopin@nea.com and hworland@nea.com to continue the conversation.